Correlation Between Sichuan Fulin and Suzhou Weizhixiang

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

Diversification Opportunities for Sichuan Fulin and Suzhou Weizhixiang

0.96

Correlation Coefficient

Sichuan Fulin  Suzhou Weizhixiang

Almost no diversification

The 3 months correlation between Sichuan and Suzhou is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Fulin Transportation and Suzhou Weizhixiang Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou Weizhixiang Food 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 Suzhou Weizhixiang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou Weizhixiang Food has no effect on the direction of Sichuan Fulin i.e., Sichuan Fulin and Suzhou Weizhixiang go up and down completely randomly.

Pair Corralation between Sichuan Fulin and Suzhou Weizhixiang

Assuming the 90 days trading horizon Sichuan Fulin Transportation is expected to generate 0.99 times more return on investment than Suzhou Weizhixiang. However, Sichuan Fulin Transportation is 1.01 times less risky than Suzhou Weizhixiang. It trades about 0.02 of its potential returns per unit of risk. Suzhou Weizhixiang Food is currently generating about -0.05 per unit of risk. If you would invest  668.00  in Sichuan Fulin Transportation on September 27, 2024 and sell it today you would earn a total of  58.00  from holding Sichuan Fulin Transportation or generate 8.68% return on investment over 90 days.

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

Sichuan Fulin Transportation  vs.  Suzhou Weizhixiang Food

Sichuan Fulin Transp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Fulin Transportation are ranked lower than 12 (%) 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.

Suzhou Weizhixiang Food

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Weizhixiang Food are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Suzhou Weizhixiang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sichuan Fulin and Suzhou Weizhixiang

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

The idea behind Sichuan Fulin Transportation and Suzhou Weizhixiang Food 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.