Correlation Between Fujian Longzhou and Harbin Hatou

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

Diversification Opportunities for Fujian Longzhou and Harbin Hatou

0.6

Correlation Coefficient

Fujian Longzhou  Harbin Hatou

Poor diversification

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

Pair Corralation between Fujian Longzhou and Harbin Hatou

Assuming the 90 days trading horizon Fujian Longzhou Transportation is expected to under-perform the Harbin Hatou. But the stock apears to be less risky and, when comparing its historical volatility, Fujian Longzhou Transportation is 1.0 times less risky than Harbin Hatou. The stock trades about -0.49 of its potential returns per unit of risk. The Harbin Hatou Investment is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  719.00  in Harbin Hatou Investment on October 8, 2024 and sell it today you would lose (92.00) from holding Harbin Hatou Investment or give up 12.8% of portfolio value over 90 days.

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

Fujian Longzhou Transportation  vs.  Harbin Hatou Investment

Fujian Longzhou Tran

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fujian Longzhou Transportation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Harbin Hatou Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harbin Hatou Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Fujian Longzhou and Harbin Hatou

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

The idea behind Fujian Longzhou Transportation and Harbin Hatou Investment 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .