Correlation Between Dezhan HealthCare and Ningbo Tech

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Can any of the company-specific risk be diversified away by investing in both Dezhan HealthCare and Ningbo Tech 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 Dezhan HealthCare and Ningbo Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dezhan HealthCare Co and Ningbo Tech Bank Co, you can compare the effects of market volatilities on Dezhan HealthCare and Ningbo Tech 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 Dezhan HealthCare with a short position of Ningbo Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dezhan HealthCare and Ningbo Tech.

Diversification Opportunities for Dezhan HealthCare and Ningbo Tech

0.05
  Correlation Coefficient

Significant diversification

The 3 months correlation between Dezhan and Ningbo is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Dezhan HealthCare Co and Ningbo Tech Bank Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Tech Bank and Dezhan HealthCare 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 Dezhan HealthCare Co are associated (or correlated) with Ningbo Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Tech Bank has no effect on the direction of Dezhan HealthCare i.e., Dezhan HealthCare and Ningbo Tech go up and down completely randomly.

Pair Corralation between Dezhan HealthCare and Ningbo Tech

Assuming the 90 days trading horizon Dezhan HealthCare is expected to generate 7.44 times less return on investment than Ningbo Tech. In addition to that, Dezhan HealthCare is 1.64 times more volatile than Ningbo Tech Bank Co. It trades about 0.01 of its total potential returns per unit of risk. Ningbo Tech Bank Co is currently generating about 0.1 per unit of volatility. If you would invest  267.00  in Ningbo Tech Bank Co on October 26, 2024 and sell it today you would earn a total of  42.00  from holding Ningbo Tech Bank Co or generate 15.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Dezhan HealthCare Co  vs.  Ningbo Tech Bank Co

 Performance 
       Timeline  
Dezhan HealthCare 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Tech Bank Co are ranked lower than 7 (%) 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.

Dezhan HealthCare and Ningbo Tech Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dezhan HealthCare and Ningbo Tech

The main advantage of trading using opposite Dezhan HealthCare and Ningbo Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dezhan HealthCare position performs unexpectedly, Ningbo Tech 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 Tech will offset losses from the drop in Ningbo Tech's long position.
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The idea behind Dezhan HealthCare Co and Ningbo Tech Bank 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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