Correlation Between FSPG Hi and Zhonghong Pulin

Can any of the company-specific risk be diversified away by investing in both FSPG Hi and Zhonghong Pulin 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 FSPG Hi and Zhonghong Pulin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FSPG Hi Tech Co and Zhonghong Pulin Medical, you can compare the effects of market volatilities on FSPG Hi and Zhonghong Pulin 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 FSPG Hi with a short position of Zhonghong Pulin. Check out your portfolio center. Please also check ongoing floating volatility patterns of FSPG Hi and Zhonghong Pulin.

Diversification Opportunities for FSPG Hi and Zhonghong Pulin

0.19

Correlation Coefficient

FSPG Hi  Zhonghong Pulin

Average diversification

The 3 months correlation between FSPG and Zhonghong is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding FSPG Hi Tech Co and Zhonghong Pulin Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhonghong Pulin Medical and FSPG Hi 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 FSPG Hi Tech Co are associated (or correlated) with Zhonghong Pulin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhonghong Pulin Medical has no effect on the direction of FSPG Hi i.e., FSPG Hi and Zhonghong Pulin go up and down completely randomly.

Pair Corralation between FSPG Hi and Zhonghong Pulin

Assuming the 90 days trading horizon FSPG Hi Tech Co is expected to generate 1.57 times more return on investment than Zhonghong Pulin. However, FSPG Hi is 1.57 times more volatile than Zhonghong Pulin Medical. It trades about 0.08 of its potential returns per unit of risk. Zhonghong Pulin Medical is currently generating about -0.06 per unit of risk. If you would invest  597.00  in FSPG Hi Tech Co on December 25, 2024 and sell it today you would earn a total of  74.00  from holding FSPG Hi Tech Co or generate 12.4% return on investment over 90 days.

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

FSPG Hi Tech Co  vs.  Zhonghong Pulin Medical

FSPG Hi Tech

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FSPG Hi Tech Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, FSPG Hi sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhonghong Pulin Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zhonghong Pulin Medical 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.

Pair Trading with FSPG Hi and Zhonghong Pulin

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

The idea behind FSPG Hi Tech Co and Zhonghong Pulin Medical 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..