Correlation Between Piotech and Ningbo Construction

Can any of the company-specific risk be diversified away by investing in both Piotech and Ningbo Construction at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Piotech and Ningbo Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Piotech Inc A and Ningbo Construction Co, you can compare the effects of market volatilities on Piotech and Ningbo Construction and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Piotech with a short position of Ningbo Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Piotech and Ningbo Construction.

Diversification Opportunities for Piotech and Ningbo Construction

0.9

Correlation Coefficient

Piotech  Ningbo Construction

Almost no diversification

The 3 months correlation between Piotech and Ningbo is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Piotech Inc A and Ningbo Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Construction and Piotech is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Piotech Inc A are associated (or correlated) with Ningbo Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Construction has no effect on the direction of Piotech i.e., Piotech and Ningbo Construction go up and down completely randomly.

Pair Corralation between Piotech and Ningbo Construction

Assuming the 90 days trading horizon Piotech Inc A is expected to generate 1.47 times more return on investment than Ningbo Construction. However, Piotech is 1.47 times more volatile than Ningbo Construction Co. It trades about 0.16 of its potential returns per unit of risk. Ningbo Construction Co is currently generating about 0.18 per unit of risk. If you would invest  11,751  in Piotech Inc A on September 12, 2024 and sell it today you would earn a total of  6,264  from holding Piotech Inc A or generate 53.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Piotech Inc A  vs.  Ningbo Construction Co

Piotech Inc A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Piotech Inc A are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Piotech sustained solid returns over the last few months and may actually be approaching a breakup point.

Ningbo Construction

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Construction Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Piotech and Ningbo Construction

The main advantage of trading using opposite Piotech and Ningbo Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Piotech position performs unexpectedly, Ningbo Construction can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Ningbo Construction will offset losses from the drop in Ningbo Construction's long position.

The idea behind Piotech Inc A and Ningbo Construction Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.