Correlation Between Ningbo Construction and GuoChuang Software
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By analyzing existing cross correlation between Ningbo Construction Co and GuoChuang Software Co, you can compare the effects of market volatilities on Ningbo Construction and GuoChuang Software 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 Construction with a short position of GuoChuang Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ningbo Construction and GuoChuang Software.
Diversification Opportunities for Ningbo Construction and GuoChuang Software
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ningbo and GuoChuang is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Construction Co and GuoChuang Software Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GuoChuang Software and Ningbo 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 Ningbo Construction Co are associated (or correlated) with GuoChuang Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GuoChuang Software has no effect on the direction of Ningbo Construction i.e., Ningbo Construction and GuoChuang Software go up and down completely randomly.
Pair Corralation between Ningbo Construction and GuoChuang Software
Assuming the 90 days trading horizon Ningbo Construction is expected to generate 5.7 times less return on investment than GuoChuang Software. But when comparing it to its historical volatility, Ningbo Construction Co is 1.61 times less risky than GuoChuang Software. It trades about 0.01 of its potential returns per unit of risk. GuoChuang Software Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,816 in GuoChuang Software Co on October 16, 2024 and sell it today you would earn a total of 221.00 from holding GuoChuang Software Co or generate 12.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ningbo Construction Co vs. GuoChuang Software Co
Performance |
| Timeline |
| Ningbo Construction |
| GuoChuang Software |
Ningbo Construction and GuoChuang Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ningbo Construction and GuoChuang Software
The main advantage of trading using opposite Ningbo Construction and GuoChuang Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ningbo Construction position performs unexpectedly, GuoChuang Software 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 GuoChuang Software will offset losses from the drop in GuoChuang Software's long position.The idea behind Ningbo Construction Co and GuoChuang Software Co 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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