Correlation Between Sichuan Fulin and Changchun

Can any of the company-specific risk be diversified away by investing in both Sichuan Fulin and Changchun 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 Changchun 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 Changchun UP Optotech, you can compare the effects of market volatilities on Sichuan Fulin and Changchun 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 Changchun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sichuan Fulin and Changchun.

Diversification Opportunities for Sichuan Fulin and Changchun

0.35

Correlation Coefficient

Sichuan Fulin  Changchun

Weak diversification

The 3 months correlation between Sichuan and Changchun is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Fulin Transportation and Changchun UP Optotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changchun UP Optotech 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 Changchun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changchun UP Optotech has no effect on the direction of Sichuan Fulin i.e., Sichuan Fulin and Changchun go up and down completely randomly.

Pair Corralation between Sichuan Fulin and Changchun

Assuming the 90 days trading horizon Sichuan Fulin Transportation is expected to generate 0.7 times more return on investment than Changchun. However, Sichuan Fulin Transportation is 1.42 times less risky than Changchun. It trades about 0.09 of its potential returns per unit of risk. Changchun UP Optotech is currently generating about 0.05 per unit of risk. If you would invest  598.00  in Sichuan Fulin Transportation on October 10, 2024 and sell it today you would earn a total of  86.00  from holding Sichuan Fulin Transportation or generate 14.38% return on investment over 90 days.

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

Sichuan Fulin Transportation  vs.  Changchun UP Optotech

Sichuan Fulin Transp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Fulin Transportation are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Fulin sustained solid returns over the last few months and may actually be approaching a breakup point.

Changchun UP Optotech

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Sichuan Fulin and Changchun

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

The idea behind Sichuan Fulin Transportation and Changchun UP Optotech 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.