Correlation Between Cultural Investment and Ningbo MedicalSystem

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

Diversification Opportunities for Cultural Investment and Ningbo MedicalSystem

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Cultural and Ningbo is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Cultural Investment Holdings and Ningbo MedicalSystem Biotechno in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo MedicalSystem and Cultural Investment 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 Cultural Investment Holdings 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 Cultural Investment i.e., Cultural Investment and Ningbo MedicalSystem go up and down completely randomly.

Pair Corralation between Cultural Investment and Ningbo MedicalSystem

Assuming the 90 days trading horizon Cultural Investment Holdings is expected to generate 1.34 times more return on investment than Ningbo MedicalSystem. However, Cultural Investment is 1.34 times more volatile than Ningbo MedicalSystem Biotechnology. It trades about 0.03 of its potential returns per unit of risk. Ningbo MedicalSystem Biotechnology is currently generating about 0.0 per unit of risk. If you would invest  230.00  in Cultural Investment Holdings on September 12, 2024 and sell it today you would earn a total of  2.00  from holding Cultural Investment Holdings or generate 0.87% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Cultural Investment Holdings  vs.  Ningbo MedicalSystem Biotechno

 Performance 
       Timeline  
Cultural Investment 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Cultural Investment Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cultural Investment sustained solid returns over the last few months and may actually be approaching a breakup point.
Ningbo MedicalSystem 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo MedicalSystem Biotechnology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo MedicalSystem sustained solid returns over the last few months and may actually be approaching a breakup point.

Cultural Investment and Ningbo MedicalSystem Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cultural Investment and Ningbo MedicalSystem

The main advantage of trading using opposite Cultural Investment and Ningbo MedicalSystem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cultural Investment 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 Cultural Investment Holdings 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.
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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