Correlation Between Shaanxi Construction and Ningbo Fangzheng
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By analyzing existing cross correlation between Shaanxi Construction Machinery and Ningbo Fangzheng Automobile, you can compare the effects of market volatilities on Shaanxi Construction and Ningbo Fangzheng 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 Shaanxi Construction with a short position of Ningbo Fangzheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shaanxi Construction and Ningbo Fangzheng.
Diversification Opportunities for Shaanxi Construction and Ningbo Fangzheng
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Shaanxi and Ningbo is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Shaanxi Construction Machinery and Ningbo Fangzheng Automobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Fangzheng Aut and Shaanxi Construction 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 Shaanxi Construction Machinery are associated (or correlated) with Ningbo Fangzheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Fangzheng Aut has no effect on the direction of Shaanxi Construction i.e., Shaanxi Construction and Ningbo Fangzheng go up and down completely randomly.
Pair Corralation between Shaanxi Construction and Ningbo Fangzheng
Assuming the 90 days trading horizon Shaanxi Construction Machinery is expected to under-perform the Ningbo Fangzheng. In addition to that, Shaanxi Construction is 1.04 times more volatile than Ningbo Fangzheng Automobile. It trades about -0.5 of its total potential returns per unit of risk. Ningbo Fangzheng Automobile is currently generating about -0.27 per unit of volatility. If you would invest 1,738 in Ningbo Fangzheng Automobile on October 15, 2024 and sell it today you would lose (264.00) from holding Ningbo Fangzheng Automobile or give up 15.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shaanxi Construction Machinery vs. Ningbo Fangzheng Automobile
Performance |
| Timeline |
| Shaanxi Construction |
| Ningbo Fangzheng Aut |
Shaanxi Construction and Ningbo Fangzheng Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shaanxi Construction and Ningbo Fangzheng
The main advantage of trading using opposite Shaanxi Construction and Ningbo Fangzheng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shaanxi Construction position performs unexpectedly, Ningbo Fangzheng 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 Fangzheng will offset losses from the drop in Ningbo Fangzheng's long position.The idea behind Shaanxi Construction Machinery and Ningbo Fangzheng Automobile 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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