Correlation Between Sichuan Fulin and Sichuan Hebang

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

Diversification Opportunities for Sichuan Fulin and Sichuan Hebang

-0.25

Correlation Coefficient

Sichuan Fulin  Sichuan Hebang

Very good diversification

The 3 months correlation between Sichuan and Sichuan is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Fulin Transportation and Sichuan Hebang Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Hebang Biote 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 Sichuan Hebang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Hebang Biote has no effect on the direction of Sichuan Fulin i.e., Sichuan Fulin and Sichuan Hebang go up and down completely randomly.

Pair Corralation between Sichuan Fulin and Sichuan Hebang

Assuming the 90 days trading horizon Sichuan Fulin Transportation is expected to generate 2.59 times more return on investment than Sichuan Hebang. However, Sichuan Fulin is 2.59 times more volatile than Sichuan Hebang Biotechnology. It trades about 0.05 of its potential returns per unit of risk. Sichuan Hebang Biotechnology is currently generating about -0.18 per unit of risk. If you would invest  721.00  in Sichuan Fulin Transportation on December 25, 2024 and sell it today you would earn a total of  45.00  from holding Sichuan Fulin Transportation or generate 6.24% 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.  Sichuan Hebang Biotechnology

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.

Sichuan Hebang Biote

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sichuan Hebang Biotechnology 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 Sichuan Hebang

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

The idea behind Sichuan Fulin Transportation and Sichuan Hebang Biotechnology 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.