Correlation Between Fujian Newland and Shaanxi Broadcast

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

By analyzing existing cross correlation between Fujian Newland Computer and Shaanxi Broadcast TV, you can compare the effects of market volatilities on Fujian Newland and Shaanxi Broadcast 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 Fujian Newland with a short position of Shaanxi Broadcast. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fujian Newland and Shaanxi Broadcast.

Diversification Opportunities for Fujian Newland and Shaanxi Broadcast

0.88

Correlation Coefficient

Fujian Newland  Shaanxi Broadcast

Very poor diversification

The 3 months correlation between Fujian and Shaanxi is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Fujian Newland Computer and Shaanxi Broadcast TV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaanxi Broadcast and Fujian Newland 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 Fujian Newland Computer are associated (or correlated) with Shaanxi Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaanxi Broadcast has no effect on the direction of Fujian Newland i.e., Fujian Newland and Shaanxi Broadcast go up and down completely randomly.

Pair Corralation between Fujian Newland and Shaanxi Broadcast

Assuming the 90 days trading horizon Fujian Newland Computer is expected to generate 0.96 times more return on investment than Shaanxi Broadcast. However, Fujian Newland Computer is 1.05 times less risky than Shaanxi Broadcast. It trades about -0.26 of its potential returns per unit of risk. Shaanxi Broadcast TV is currently generating about -0.41 per unit of risk. If you would invest  2,070  in Fujian Newland Computer on October 9, 2024 and sell it today you would lose (283.00) from holding Fujian Newland Computer or give up 13.67% of portfolio value over 90 days.

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

Fujian Newland Computer  vs.  Shaanxi Broadcast TV

Fujian Newland Computer

Risk-Adjusted Performance

3 of 100

Insignificant

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

Shaanxi Broadcast

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shaanxi Broadcast TV are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shaanxi Broadcast is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fujian Newland and Shaanxi Broadcast

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

The idea behind Fujian Newland Computer and Shaanxi Broadcast TV 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.