Correlation Between Ningbo Homelink and Shenzhen Clou

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

Diversification Opportunities for Ningbo Homelink and Shenzhen Clou

NingboShenzhenDiversified AwayNingboShenzhenDiversified Away100%
0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Ningbo and Shenzhen is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Homelink Eco iTech and Shenzhen Clou Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Clou Electronics and Ningbo Homelink 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 Homelink Eco iTech are associated (or correlated) with Shenzhen Clou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Clou Electronics has no effect on the direction of Ningbo Homelink i.e., Ningbo Homelink and Shenzhen Clou go up and down completely randomly.

Pair Corralation between Ningbo Homelink and Shenzhen Clou

Assuming the 90 days trading horizon Ningbo Homelink Eco iTech is expected to generate 1.02 times more return on investment than Shenzhen Clou. However, Ningbo Homelink is 1.02 times more volatile than Shenzhen Clou Electronics. It trades about 0.01 of its potential returns per unit of risk. Shenzhen Clou Electronics is currently generating about -0.04 per unit of risk. If you would invest  2,160  in Ningbo Homelink Eco iTech on November 30, 2024 and sell it today you would lose (221.00) from holding Ningbo Homelink Eco iTech or give up 10.23% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Ningbo Homelink Eco iTech  vs.  Shenzhen Clou Electronics

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-50510
JavaScript chart by amCharts 3.21.15301193 002121
       Timeline  
Ningbo Homelink Eco 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Homelink Eco iTech are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Homelink sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb151617181920
Shenzhen Clou Electronics 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Clou Electronics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shenzhen Clou is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb44.24.44.64.855.25.45.6

Ningbo Homelink and Shenzhen Clou Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-8.6-6.44-4.28-2.120.03632.144.316.498.66 0.0200.0250.0300.0350.0400.0450.0500.055
JavaScript chart by amCharts 3.21.15301193 002121
       Returns  

Pair Trading with Ningbo Homelink and Shenzhen Clou

The main advantage of trading using opposite Ningbo Homelink and Shenzhen Clou positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ningbo Homelink position performs unexpectedly, Shenzhen Clou 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 Shenzhen Clou will offset losses from the drop in Shenzhen Clou's long position.
The idea behind Ningbo Homelink Eco iTech and Shenzhen Clou Electronics 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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