Correlation Between Focus Media and De Rucci

Can any of the company-specific risk be diversified away by investing in both Focus Media and De Rucci 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 Focus Media and De Rucci into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Focus Media Information and De Rucci Healthy, you can compare the effects of market volatilities on Focus Media and De Rucci 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 Focus Media with a short position of De Rucci. Check out your portfolio center. Please also check ongoing floating volatility patterns of Focus Media and De Rucci.

Diversification Opportunities for Focus Media and De Rucci

0.77

Correlation Coefficient

Focus Media  De Rucci

Poor diversification

The 3 months correlation between Focus and 001323 is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Focus Media Information and De Rucci Healthy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on De Rucci Healthy and Focus Media 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 Focus Media Information are associated (or correlated) with De Rucci. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of De Rucci Healthy has no effect on the direction of Focus Media i.e., Focus Media and De Rucci go up and down completely randomly.

Pair Corralation between Focus Media and De Rucci

Assuming the 90 days trading horizon Focus Media Information is expected to under-perform the De Rucci. But the stock apears to be less risky and, when comparing its historical volatility, Focus Media Information is 1.77 times less risky than De Rucci. The stock trades about -0.12 of its potential returns per unit of risk. The De Rucci Healthy is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,530  in De Rucci Healthy on September 19, 2024 and sell it today you would earn a total of  246.00  from holding De Rucci Healthy or generate 6.97% return on investment over 90 days.

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

Focus Media Information  vs.  De Rucci Healthy

Focus Media Information

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Focus Media Information are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Focus Media sustained solid returns over the last few months and may actually be approaching a breakup point.

De Rucci Healthy

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with Focus Media and De Rucci

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

The idea behind Focus Media Information and De Rucci Healthy 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.