Correlation Between Baoshan Iron and Ningbo Kangqiang
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By analyzing existing cross correlation between Baoshan Iron Steel and Ningbo Kangqiang Electronics, you can compare the effects of market volatilities on Baoshan Iron and Ningbo Kangqiang 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 Baoshan Iron with a short position of Ningbo Kangqiang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baoshan Iron and Ningbo Kangqiang.
Diversification Opportunities for Baoshan Iron and Ningbo Kangqiang
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Baoshan and Ningbo is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Baoshan Iron Steel and Ningbo Kangqiang Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Kangqiang Ele and Baoshan Iron 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 Baoshan Iron Steel are associated (or correlated) with Ningbo Kangqiang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Kangqiang Ele has no effect on the direction of Baoshan Iron i.e., Baoshan Iron and Ningbo Kangqiang go up and down completely randomly.
Pair Corralation between Baoshan Iron and Ningbo Kangqiang
Assuming the 90 days trading horizon Baoshan Iron is expected to generate 4.72 times less return on investment than Ningbo Kangqiang. But when comparing it to its historical volatility, Baoshan Iron Steel is 2.6 times less risky than Ningbo Kangqiang. It trades about 0.05 of its potential returns per unit of risk. Ningbo Kangqiang Electronics is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,609 in Ningbo Kangqiang Electronics on November 7, 2024 and sell it today you would earn a total of 104.00 from holding Ningbo Kangqiang Electronics or generate 6.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baoshan Iron Steel vs. Ningbo Kangqiang Electronics
Performance |
| Timeline |
| Baoshan Iron Steel |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| Ningbo Kangqiang Ele |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
Baoshan Iron and Ningbo Kangqiang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baoshan Iron and Ningbo Kangqiang
The main advantage of trading using opposite Baoshan Iron and Ningbo Kangqiang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baoshan Iron position performs unexpectedly, Ningbo Kangqiang 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 Kangqiang will offset losses from the drop in Ningbo Kangqiang's long position.The idea behind Baoshan Iron Steel and Ningbo Kangqiang 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.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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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