Correlation Between Jiugui Liquor and Fuda Alloy

Can any of the company-specific risk be diversified away by investing in both Jiugui Liquor and Fuda Alloy 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 Jiugui Liquor and Fuda Alloy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jiugui Liquor Co and Fuda Alloy Materials, you can compare the effects of market volatilities on Jiugui Liquor and Fuda Alloy 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 Jiugui Liquor with a short position of Fuda Alloy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiugui Liquor and Fuda Alloy.

Diversification Opportunities for Jiugui Liquor and Fuda Alloy

-0.54

Correlation Coefficient

Jiugui Liquor  Fuda Alloy

Excellent diversification

The 3 months correlation between Jiugui and Fuda is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Jiugui Liquor Co and Fuda Alloy Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuda Alloy Materials and Jiugui Liquor 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 Jiugui Liquor Co are associated (or correlated) with Fuda Alloy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuda Alloy Materials has no effect on the direction of Jiugui Liquor i.e., Jiugui Liquor and Fuda Alloy go up and down completely randomly.

Pair Corralation between Jiugui Liquor and Fuda Alloy

Assuming the 90 days trading horizon Jiugui Liquor Co is expected to under-perform the Fuda Alloy. But the stock apears to be less risky and, when comparing its historical volatility, Jiugui Liquor Co is 1.12 times less risky than Fuda Alloy. The stock trades about -0.07 of its potential returns per unit of risk. The Fuda Alloy Materials is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,227  in Fuda Alloy Materials on December 24, 2024 and sell it today you would earn a total of  458.00  from holding Fuda Alloy Materials or generate 37.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Jiugui Liquor Co  vs.  Fuda Alloy Materials

Jiugui Liquor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jiugui Liquor Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Fuda Alloy Materials

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fuda Alloy Materials are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fuda Alloy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiugui Liquor and Fuda Alloy

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

The idea behind Jiugui Liquor Co and Fuda Alloy Materials 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.