Correlation Between Ningbo Tech and Jiangsu Yanghe

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

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

Diversification Opportunities for Ningbo Tech and Jiangsu Yanghe

0.29

Correlation Coefficient

Ningbo Tech  Jiangsu Yanghe

Modest diversification

The 3 months correlation between Ningbo and Jiangsu is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Tech Bank Co and Jiangsu Yanghe Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Yanghe Brewery and Ningbo Tech 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 Ningbo Tech Bank Co are associated (or correlated) with Jiangsu Yanghe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Yanghe Brewery has no effect on the direction of Ningbo Tech i.e., Ningbo Tech and Jiangsu Yanghe go up and down completely randomly.

Pair Corralation between Ningbo Tech and Jiangsu Yanghe

Assuming the 90 days trading horizon Ningbo Tech Bank Co is expected to under-perform the Jiangsu Yanghe. In addition to that, Ningbo Tech is 1.7 times more volatile than Jiangsu Yanghe Brewery. It trades about -0.29 of its total potential returns per unit of risk. Jiangsu Yanghe Brewery is currently generating about -0.05 per unit of volatility. If you would invest  8,509  in Jiangsu Yanghe Brewery on September 29, 2024 and sell it today you would lose (107.00) from holding Jiangsu Yanghe Brewery or give up 1.26% of portfolio value over 90 days.

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

Ningbo Tech Bank Co  vs.  Jiangsu Yanghe Brewery

Ningbo Tech Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Tech Bank Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Tech sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangsu Yanghe Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiangsu Yanghe Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ningbo Tech and Jiangsu Yanghe

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

The idea behind Ningbo Tech Bank Co and Jiangsu Yanghe Brewery 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..