Correlation Between Fujian Longzhou and Shenzhen Hifuture

Can any of the company-specific risk be diversified away by investing in both Fujian Longzhou and Shenzhen Hifuture 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 Fujian Longzhou and Shenzhen Hifuture into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fujian Longzhou Transportation and Shenzhen Hifuture Electric, you can compare the effects of market volatilities on Fujian Longzhou and Shenzhen Hifuture 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 Fujian Longzhou with a short position of Shenzhen Hifuture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fujian Longzhou and Shenzhen Hifuture.

Diversification Opportunities for Fujian Longzhou and Shenzhen Hifuture

0.33

Correlation Coefficient

Fujian Longzhou  Shenzhen Hifuture

Weak diversification

The 3 months correlation between Fujian and Shenzhen is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Fujian Longzhou Transportation and Shenzhen Hifuture Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Hifuture and Fujian Longzhou 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 Fujian Longzhou Transportation are associated (or correlated) with Shenzhen Hifuture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Hifuture has no effect on the direction of Fujian Longzhou i.e., Fujian Longzhou and Shenzhen Hifuture go up and down completely randomly.

Pair Corralation between Fujian Longzhou and Shenzhen Hifuture

Assuming the 90 days trading horizon Fujian Longzhou Transportation is expected to generate 1.1 times more return on investment than Shenzhen Hifuture. However, Fujian Longzhou is 1.1 times more volatile than Shenzhen Hifuture Electric. It trades about 0.12 of its potential returns per unit of risk. Shenzhen Hifuture Electric is currently generating about -0.11 per unit of risk. If you would invest  435.00  in Fujian Longzhou Transportation on December 26, 2024 and sell it today you would earn a total of  80.00  from holding Fujian Longzhou Transportation or generate 18.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Fujian Longzhou Transportation  vs.  Shenzhen Hifuture Electric

Fujian Longzhou Tran

Risk-Adjusted Performance

OK

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

Shenzhen Hifuture

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen Hifuture Electric 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 Fujian Longzhou and Shenzhen Hifuture

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

The idea behind Fujian Longzhou Transportation and Shenzhen Hifuture Electric 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.