Correlation Between Shantui Construction and Fujian Green

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

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

Diversification Opportunities for Shantui Construction and Fujian Green

0.72

Correlation Coefficient

Shantui Construction  Fujian Green

Poor diversification

The 3 months correlation between Shantui and Fujian is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Shantui Construction Machinery 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 Shantui 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 Shantui Construction Machinery 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 Shantui Construction i.e., Shantui Construction and Fujian Green go up and down completely randomly.

Pair Corralation between Shantui Construction and Fujian Green

Assuming the 90 days trading horizon Shantui Construction Machinery is expected to generate 0.94 times more return on investment than Fujian Green. However, Shantui Construction Machinery is 1.06 times less risky than Fujian Green. It trades about 0.08 of its potential returns per unit of risk. Fujian Green Pine is currently generating about -0.01 per unit of risk. If you would invest  398.00  in Shantui Construction Machinery on October 9, 2024 and sell it today you would earn a total of  589.00  from holding Shantui Construction Machinery or generate 147.99% return on investment over 90 days.

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

Shantui Construction Machinery  vs.  Fujian Green Pine

Shantui Construction

Risk-Adjusted Performance

11 of 100

OK

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

Fujian Green Pine

Risk-Adjusted Performance

4 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Green Pine are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fujian Green may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Shantui Construction and Fujian Green

The main advantage of trading using opposite Shantui Construction and Fujian Green positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shantui Construction 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 Shantui Construction Machinery 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.