Correlation Between Sinocat Environmental and Ningbo Bohui

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

By analyzing existing cross correlation between Sinocat Environmental Technology and Ningbo Bohui Chemical, you can compare the effects of market volatilities on Sinocat Environmental and Ningbo Bohui 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 Sinocat Environmental with a short position of Ningbo Bohui. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinocat Environmental and Ningbo Bohui.

Diversification Opportunities for Sinocat Environmental and Ningbo Bohui

0.8

Correlation Coefficient

Sinocat Environmental  Ningbo Bohui

Very poor diversification

The 3 months correlation between Sinocat and Ningbo is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Sinocat Environmental Technolo and Ningbo Bohui Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Bohui Chemical and Sinocat Environmental 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 Sinocat Environmental Technology are associated (or correlated) with Ningbo Bohui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Bohui Chemical has no effect on the direction of Sinocat Environmental i.e., Sinocat Environmental and Ningbo Bohui go up and down completely randomly.

Pair Corralation between Sinocat Environmental and Ningbo Bohui

Assuming the 90 days trading horizon Sinocat Environmental Technology is expected to generate 1.6 times more return on investment than Ningbo Bohui. However, Sinocat Environmental is 1.6 times more volatile than Ningbo Bohui Chemical. It trades about 0.07 of its potential returns per unit of risk. Ningbo Bohui Chemical is currently generating about -0.12 per unit of risk. If you would invest  1,793  in Sinocat Environmental Technology on September 28, 2024 and sell it today you would earn a total of  85.00  from holding Sinocat Environmental Technology or generate 4.74% return on investment over 90 days.

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

Sinocat Environmental Technolo  vs.  Ningbo Bohui Chemical

Sinocat Environmental

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sinocat Environmental Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sinocat Environmental sustained solid returns over the last few months and may actually be approaching a breakup point.

Ningbo Bohui Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ningbo Bohui Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ningbo Bohui is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sinocat Environmental and Ningbo Bohui

The main advantage of trading using opposite Sinocat Environmental and Ningbo Bohui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sinocat Environmental position performs unexpectedly, Ningbo Bohui 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 Bohui will offset losses from the drop in Ningbo Bohui's long position.

The idea behind Sinocat Environmental Technology and Ningbo Bohui Chemical 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.