Correlation Between Sichuan Fulin and Tianshui Huatian

Can any of the company-specific risk be diversified away by investing in both Sichuan Fulin and Tianshui Huatian 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 Sichuan Fulin and Tianshui Huatian into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sichuan Fulin Transportation and Tianshui Huatian Technology, you can compare the effects of market volatilities on Sichuan Fulin and Tianshui Huatian 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 Sichuan Fulin with a short position of Tianshui Huatian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sichuan Fulin and Tianshui Huatian.

Diversification Opportunities for Sichuan Fulin and Tianshui Huatian

-0.04

Correlation Coefficient

Sichuan Fulin  Tianshui Huatian

Good diversification

The 3 months correlation between Sichuan and Tianshui is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Fulin Transportation and Tianshui Huatian Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianshui Huatian Tec and Sichuan Fulin 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 Sichuan Fulin Transportation are associated (or correlated) with Tianshui Huatian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianshui Huatian Tec has no effect on the direction of Sichuan Fulin i.e., Sichuan Fulin and Tianshui Huatian go up and down completely randomly.

Pair Corralation between Sichuan Fulin and Tianshui Huatian

Assuming the 90 days trading horizon Sichuan Fulin Transportation is expected to generate 1.48 times more return on investment than Tianshui Huatian. However, Sichuan Fulin is 1.48 times more volatile than Tianshui Huatian Technology. It trades about 0.05 of its potential returns per unit of risk. Tianshui Huatian Technology is currently generating about -0.12 per unit of risk. If you would invest  726.00  in Sichuan Fulin Transportation on December 26, 2024 and sell it today you would earn a total of  45.00  from holding Sichuan Fulin Transportation or generate 6.2% return on investment over 90 days.

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

Sichuan Fulin Transportation  vs.  Tianshui Huatian Technology

Sichuan Fulin Transp

Risk-Adjusted Performance

Insignificant

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

Tianshui Huatian Tec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tianshui Huatian Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sichuan Fulin and Tianshui Huatian

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

The idea behind Sichuan Fulin Transportation and Tianshui Huatian Technology 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.