Correlation Between Fujian Longzhou and Dongxing Sec

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

Diversification Opportunities for Fujian Longzhou and Dongxing Sec

0.46

Correlation Coefficient

Fujian Longzhou  Dongxing Sec

Very weak diversification

The 3 months correlation between Fujian and Dongxing is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Fujian Longzhou Transportation and Dongxing Sec Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongxing Sec 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 Dongxing Sec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongxing Sec has no effect on the direction of Fujian Longzhou i.e., Fujian Longzhou and Dongxing Sec go up and down completely randomly.

Pair Corralation between Fujian Longzhou and Dongxing Sec

Assuming the 90 days trading horizon Fujian Longzhou is expected to generate 41.98 times less return on investment than Dongxing Sec. In addition to that, Fujian Longzhou is 1.26 times more volatile than Dongxing Sec Co. It trades about 0.0 of its total potential returns per unit of risk. Dongxing Sec Co is currently generating about 0.07 per unit of volatility. If you would invest  775.00  in Dongxing Sec Co on October 9, 2024 and sell it today you would earn a total of  271.00  from holding Dongxing Sec Co or generate 34.97% return on investment over 90 days.

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

Fujian Longzhou Transportation  vs.  Dongxing Sec Co

Fujian Longzhou Tran

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Longzhou Transportation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fujian Longzhou may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Dongxing Sec

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fujian Longzhou and Dongxing Sec

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

The idea behind Fujian Longzhou Transportation and Dongxing Sec Co 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.