Correlation Between Sichuan Fulin and Kuangda Technology

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

Diversification Opportunities for Sichuan Fulin and Kuangda Technology

0.63

Correlation Coefficient

Sichuan Fulin  Kuangda Technology

Poor diversification

The 3 months correlation between Sichuan and Kuangda is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Fulin Transportation and Kuangda Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuangda Technology 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 Kuangda Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuangda Technology has no effect on the direction of Sichuan Fulin i.e., Sichuan Fulin and Kuangda Technology go up and down completely randomly.

Pair Corralation between Sichuan Fulin and Kuangda Technology

Assuming the 90 days trading horizon Sichuan Fulin Transportation is expected to generate 0.76 times more return on investment than Kuangda Technology. However, Sichuan Fulin Transportation is 1.32 times less risky than Kuangda Technology. It trades about 0.04 of its potential returns per unit of risk. Kuangda Technology Group is currently generating about -0.01 per unit of risk. If you would invest  634.00  in Sichuan Fulin Transportation on October 6, 2024 and sell it today you would earn a total of  25.00  from holding Sichuan Fulin Transportation or generate 3.94% return on investment over 90 days.

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

Sichuan Fulin Transportation  vs.  Kuangda Technology Group

Sichuan Fulin Transp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Fulin Transportation are ranked lower than 2 (%) 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 February 2025.

Kuangda Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kuangda Technology Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Kuangda Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sichuan Fulin and Kuangda Technology

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

The idea behind Sichuan Fulin Transportation and Kuangda Technology Group 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.