Correlation Between HeNan Splendor and Ningbo Tip
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By analyzing existing cross correlation between HeNan Splendor Science and Ningbo Tip Rubber, you can compare the effects of market volatilities on HeNan Splendor and Ningbo Tip 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 HeNan Splendor with a short position of Ningbo Tip. Check out your portfolio center. Please also check ongoing floating volatility patterns of HeNan Splendor and Ningbo Tip.
Diversification Opportunities for HeNan Splendor and Ningbo Tip
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HeNan and Ningbo is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding HeNan Splendor Science and Ningbo Tip Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Tip Rubber and HeNan Splendor 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 HeNan Splendor Science are associated (or correlated) with Ningbo Tip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Tip Rubber has no effect on the direction of HeNan Splendor i.e., HeNan Splendor and Ningbo Tip go up and down completely randomly.
Pair Corralation between HeNan Splendor and Ningbo Tip
Assuming the 90 days trading horizon HeNan Splendor Science is expected to generate 1.47 times more return on investment than Ningbo Tip. However, HeNan Splendor is 1.47 times more volatile than Ningbo Tip Rubber. It trades about 0.33 of its potential returns per unit of risk. Ningbo Tip Rubber is currently generating about 0.28 per unit of risk. If you would invest 883.00 in HeNan Splendor Science on November 7, 2024 and sell it today you would earn a total of 165.00 from holding HeNan Splendor Science or generate 18.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HeNan Splendor Science vs. Ningbo Tip Rubber
Performance |
| Timeline |
| HeNan Splendor Science |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| Ningbo Tip Rubber |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
HeNan Splendor and Ningbo Tip Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HeNan Splendor and Ningbo Tip
The main advantage of trading using opposite HeNan Splendor and Ningbo Tip positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HeNan Splendor position performs unexpectedly, Ningbo Tip 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 Tip will offset losses from the drop in Ningbo Tip's long position.The idea behind HeNan Splendor Science and Ningbo Tip Rubber 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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