Correlation Between MITIE GROUP and BANK OF NINGBO

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

Diversification Opportunities for MITIE GROUP and BANK OF NINGBO

-0.77
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between MITIE and 002142 is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding MITIE GROUP PLC ORD 2 5P and BANK OF NINGBO CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK OF NINGBO and MITIE GROUP 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 MITIE GROUP PLC are associated (or correlated) with BANK OF NINGBO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK OF NINGBO has no effect on the direction of MITIE GROUP i.e., MITIE GROUP and BANK OF NINGBO go up and down completely randomly.

Pair Corralation between MITIE GROUP and BANK OF NINGBO

Assuming the 90 days horizon MITIE GROUP PLC is expected to generate 1.03 times more return on investment than BANK OF NINGBO. However, MITIE GROUP is 1.03 times more volatile than BANK OF NINGBO. It trades about 0.07 of its potential returns per unit of risk. BANK OF NINGBO is currently generating about 0.0 per unit of risk. If you would invest  3,500  in MITIE GROUP PLC on May 12, 2022 and sell it today you would earn a total of  4,240  from holding MITIE GROUP PLC or generate 121.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy77.46%
ValuesDaily Returns

MITIE GROUP PLC ORD 2 5P  vs.  BANK OF NINGBO CO

 Performance (%) 
       Timeline  
MITIE GROUP PLC 
MITIE Performance
25 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in MITIE GROUP PLC are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Even with relatively sluggish basic indicators, MITIE GROUP revealed solid returns over the last few months and may actually be approaching a breakup point.

MITIE Price Channel

BANK OF NINGBO 
002142 Performance
0 of 100
Over the last 90 days BANK OF NINGBO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in September 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

002142 Price Channel

MITIE GROUP and BANK OF NINGBO Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MITIE GROUP and BANK OF NINGBO

The main advantage of trading using opposite MITIE GROUP and BANK OF NINGBO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MITIE GROUP position performs unexpectedly, BANK OF NINGBO 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 BANK OF NINGBO will offset losses from the drop in BANK OF NINGBO's long position.

MITIE GROUP PLC

Pair trading matchups for MITIE GROUP

The idea behind MITIE GROUP PLC and BANK OF NINGBO 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.

BANK OF NINGBO

Pair trading matchups for BANK OF NINGBO

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The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against BANK OF NINGBO as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. BANK OF NINGBO's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, BANK OF NINGBO's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to BANK OF NINGBO.
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 Stock Screener module to find equities using custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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