Correlation Between CareRay Digital and Ningbo Construction

Can any of the company-specific risk be diversified away by investing in both CareRay Digital 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 CareRay Digital and Ningbo Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CareRay Digital Medical and Ningbo Construction Co, you can compare the effects of market volatilities on CareRay Digital 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 CareRay Digital with a short position of Ningbo Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of CareRay Digital and Ningbo Construction.

Diversification Opportunities for CareRay Digital and Ningbo Construction

0.91

Correlation Coefficient

CareRay Digital  Ningbo Construction

Almost no diversification

The 3 months correlation between CareRay and Ningbo is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding CareRay Digital Medical and Ningbo Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Construction and CareRay Digital 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 CareRay Digital Medical 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 CareRay Digital i.e., CareRay Digital and Ningbo Construction go up and down completely randomly.

Pair Corralation between CareRay Digital and Ningbo Construction

Assuming the 90 days trading horizon CareRay Digital is expected to generate 2.06 times less return on investment than Ningbo Construction. But when comparing it to its historical volatility, CareRay Digital Medical is 1.66 times less risky than Ningbo Construction. It trades about 0.18 of its potential returns per unit of risk. Ningbo Construction Co is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  419.00  in Ningbo Construction Co on September 5, 2024 and sell it today you would earn a total of  97.00  from holding Ningbo Construction Co or generate 23.15% return on investment over 90 days.

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

CareRay Digital Medical  vs.  Ningbo Construction Co

CareRay Digital Medical

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CareRay Digital Medical are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CareRay Digital sustained solid returns over the last few months and may actually be approaching a breakup point.

Ningbo Construction

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Construction Co are ranked lower than 16 (%) 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 CareRay Digital and Ningbo Construction

The main advantage of trading using opposite CareRay Digital and Ningbo Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CareRay Digital 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 CareRay Digital Medical 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.