Correlation Between Hunan Investment and Fujian Green

Can any of the company-specific risk be diversified away by investing in both Hunan Investment and Fujian Green 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 Hunan Investment and Fujian Green into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hunan Investment Group and Fujian Green Pine, you can compare the effects of market volatilities on Hunan Investment and Fujian Green 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 Hunan Investment with a short position of Fujian Green. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan Investment and Fujian Green.

Diversification Opportunities for Hunan Investment and Fujian Green

0.79

Correlation Coefficient

Hunan Investment  Fujian Green

Poor diversification

The 3 months correlation between Hunan and Fujian is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Investment Group and Fujian Green Pine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Green Pine and Hunan 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 Hunan Investment Group are associated (or correlated) with Fujian Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Green Pine has no effect on the direction of Hunan Investment i.e., Hunan Investment and Fujian Green go up and down completely randomly.

Pair Corralation between Hunan Investment and Fujian Green

Assuming the 90 days trading horizon Hunan Investment Group is expected to under-perform the Fujian Green. But the stock apears to be less risky and, when comparing its historical volatility, Hunan Investment Group is 1.06 times less risky than Fujian Green. The stock trades about -0.22 of its potential returns per unit of risk. The Fujian Green Pine is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  543.00  in Fujian Green Pine on October 3, 2024 and sell it today you would lose (50.00) from holding Fujian Green Pine or give up 9.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Hunan Investment Group  vs.  Fujian Green Pine

Hunan Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hunan Investment Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hunan Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fujian Green Pine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fujian Green Pine has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fujian Green is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hunan Investment and Fujian Green

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

The idea behind Hunan Investment Group and Fujian Green Pine 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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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.