Correlation Between TongFu Microelectronics and Ningbo MedicalSystem
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By analyzing existing cross correlation between TongFu Microelectronics Co and Ningbo MedicalSystem Biotechnology, you can compare the effects of market volatilities on TongFu Microelectronics and Ningbo MedicalSystem 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 TongFu Microelectronics with a short position of Ningbo MedicalSystem. Check out your portfolio center. Please also check ongoing floating volatility patterns of TongFu Microelectronics and Ningbo MedicalSystem.
Diversification Opportunities for TongFu Microelectronics and Ningbo MedicalSystem
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between TongFu and Ningbo is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding TongFu Microelectronics Co and Ningbo MedicalSystem Biotechno in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo MedicalSystem and TongFu Microelectronics 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 TongFu Microelectronics Co are associated (or correlated) with Ningbo MedicalSystem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo MedicalSystem has no effect on the direction of TongFu Microelectronics i.e., TongFu Microelectronics and Ningbo MedicalSystem go up and down completely randomly.
Pair Corralation between TongFu Microelectronics and Ningbo MedicalSystem
Assuming the 90 days trading horizon TongFu Microelectronics is expected to generate 1.07 times less return on investment than Ningbo MedicalSystem. In addition to that, TongFu Microelectronics is 2.08 times more volatile than Ningbo MedicalSystem Biotechnology. It trades about 0.06 of its total potential returns per unit of risk. Ningbo MedicalSystem Biotechnology is currently generating about 0.14 per unit of volatility. If you would invest 1,082 in Ningbo MedicalSystem Biotechnology on September 3, 2024 and sell it today you would earn a total of 79.00 from holding Ningbo MedicalSystem Biotechnology or generate 7.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TongFu Microelectronics Co vs. Ningbo MedicalSystem Biotechno
Performance |
| Timeline |
| TongFu Microelectronics |
| Ningbo MedicalSystem |
TongFu Microelectronics and Ningbo MedicalSystem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TongFu Microelectronics and Ningbo MedicalSystem
The main advantage of trading using opposite TongFu Microelectronics and Ningbo MedicalSystem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TongFu Microelectronics position performs unexpectedly, Ningbo MedicalSystem 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 MedicalSystem will offset losses from the drop in Ningbo MedicalSystem's long position.The idea behind TongFu Microelectronics Co and Ningbo MedicalSystem Biotechnology 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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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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