Correlation Between Sichuan Fulin and Cabio Biotech

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

Diversification Opportunities for Sichuan Fulin and Cabio Biotech

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Sichuan and Cabio is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Fulin Transportation and Cabio Biotech Wuhan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabio Biotech Wuhan 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 Cabio Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabio Biotech Wuhan has no effect on the direction of Sichuan Fulin i.e., Sichuan Fulin and Cabio Biotech go up and down completely randomly.

Pair Corralation between Sichuan Fulin and Cabio Biotech

Assuming the 90 days trading horizon Sichuan Fulin Transportation is expected to generate 0.64 times more return on investment than Cabio Biotech. However, Sichuan Fulin Transportation is 1.57 times less risky than Cabio Biotech. It trades about 0.11 of its potential returns per unit of risk. Cabio Biotech Wuhan is currently generating about -0.01 per unit of risk. If you would invest  604.00  in Sichuan Fulin Transportation on October 25, 2024 and sell it today you would earn a total of  103.00  from holding Sichuan Fulin Transportation or generate 17.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Sichuan Fulin Transportation  vs.  Cabio Biotech Wuhan

 Performance 
       Timeline  
Sichuan Fulin Transp 

Risk-Adjusted Performance

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OK
Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Fulin Transportation are ranked lower than 8 (%) 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.
Cabio Biotech Wuhan 

Risk-Adjusted Performance

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

Sichuan Fulin and Cabio Biotech Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sichuan Fulin and Cabio Biotech

The main advantage of trading using opposite Sichuan Fulin and Cabio Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sichuan Fulin position performs unexpectedly, Cabio Biotech 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 Cabio Biotech will offset losses from the drop in Cabio Biotech's long position.
The idea behind Sichuan Fulin Transportation and Cabio Biotech Wuhan 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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