Correlation Between Wuliangye Yibin and Fujian Longzhou

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

By analyzing existing cross correlation between Wuliangye Yibin Co and Fujian Longzhou Transportation, you can compare the effects of market volatilities on Wuliangye Yibin and Fujian Longzhou 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 Wuliangye Yibin with a short position of Fujian Longzhou. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wuliangye Yibin and Fujian Longzhou.

Diversification Opportunities for Wuliangye Yibin and Fujian Longzhou

0.23

Correlation Coefficient

Wuliangye Yibin  Fujian Longzhou

Modest diversification

The 3 months correlation between Wuliangye and Fujian is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Wuliangye Yibin Co and Fujian Longzhou Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Longzhou Tran and Wuliangye Yibin 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 Wuliangye Yibin Co are associated (or correlated) with Fujian Longzhou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Longzhou Tran has no effect on the direction of Wuliangye Yibin i.e., Wuliangye Yibin and Fujian Longzhou go up and down completely randomly.

Pair Corralation between Wuliangye Yibin and Fujian Longzhou

Assuming the 90 days trading horizon Wuliangye Yibin Co is expected to generate 0.34 times more return on investment than Fujian Longzhou. However, Wuliangye Yibin Co is 2.92 times less risky than Fujian Longzhou. It trades about -0.5 of its potential returns per unit of risk. Fujian Longzhou Transportation is currently generating about -0.36 per unit of risk. If you would invest  14,910  in Wuliangye Yibin Co on October 11, 2024 and sell it today you would lose (1,852) from holding Wuliangye Yibin Co or give up 12.42% of portfolio value over 90 days.

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

Wuliangye Yibin Co  vs.  Fujian Longzhou Transportation

Wuliangye Yibin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wuliangye Yibin 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.

Fujian Longzhou Tran

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Longzhou Transportation are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fujian Longzhou may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Wuliangye Yibin and Fujian Longzhou

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

The idea behind Wuliangye Yibin Co and Fujian Longzhou Transportation 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.