Correlation Between Sichuan Fulin and Dongguan Tarry

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

Diversification Opportunities for Sichuan Fulin and Dongguan Tarry

SichuanDongguanDiversified AwaySichuanDongguanDiversified Away100%
0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between Sichuan and Dongguan is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Fulin Transportation and Dongguan Tarry Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongguan Tarry Elect 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 Dongguan Tarry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongguan Tarry Elect has no effect on the direction of Sichuan Fulin i.e., Sichuan Fulin and Dongguan Tarry go up and down completely randomly.

Pair Corralation between Sichuan Fulin and Dongguan Tarry

Assuming the 90 days trading horizon Sichuan Fulin Transportation is expected to generate 1.24 times more return on investment than Dongguan Tarry. However, Sichuan Fulin is 1.24 times more volatile than Dongguan Tarry Electronics. It trades about 0.44 of its potential returns per unit of risk. Dongguan Tarry Electronics is currently generating about 0.06 per unit of risk. If you would invest  744.00  in Sichuan Fulin Transportation on November 29, 2024 and sell it today you would earn a total of  157.00  from holding Sichuan Fulin Transportation or generate 21.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Sichuan Fulin Transportation  vs.  Dongguan Tarry Electronics

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 51015202530
JavaScript chart by amCharts 3.21.15002357 300976
       Timeline  
Sichuan Fulin Transp 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Fulin Transportation are ranked lower than 13 (%) 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.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb6.577.588.59
Dongguan Tarry Elect 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Dongguan Tarry Electronics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongguan Tarry sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb60657075

Sichuan Fulin and Dongguan Tarry Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-8.29-6.21-4.13-2.050.02.234.546.849.1511.45 0.0200.0250.0300.0350.0400.0450.050
JavaScript chart by amCharts 3.21.15002357 300976
       Returns  

Pair Trading with Sichuan Fulin and Dongguan Tarry

The main advantage of trading using opposite Sichuan Fulin and Dongguan Tarry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sichuan Fulin position performs unexpectedly, Dongguan Tarry 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 Dongguan Tarry will offset losses from the drop in Dongguan Tarry's long position.
The idea behind Sichuan Fulin Transportation and Dongguan Tarry Electronics 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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