Correlation Between Fujian Longzhou and Xingguang Agricultural

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

Diversification Opportunities for Fujian Longzhou and Xingguang Agricultural

0.86

Correlation Coefficient

Fujian Longzhou  Xingguang Agricultural

Very poor diversification

The 3 months correlation between Fujian and Xingguang is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Fujian Longzhou Transportation and Xingguang Agricultural Mach in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xingguang Agricultural 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 Xingguang Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xingguang Agricultural has no effect on the direction of Fujian Longzhou i.e., Fujian Longzhou and Xingguang Agricultural go up and down completely randomly.

Pair Corralation between Fujian Longzhou and Xingguang Agricultural

Assuming the 90 days trading horizon Fujian Longzhou Transportation is expected to under-perform the Xingguang Agricultural. But the stock apears to be less risky and, when comparing its historical volatility, Fujian Longzhou Transportation is 1.34 times less risky than Xingguang Agricultural. The stock trades about -0.36 of its potential returns per unit of risk. The Xingguang Agricultural Mach is currently generating about -0.25 of returns per unit of risk over similar time horizon. If you would invest  999.00  in Xingguang Agricultural Mach on October 11, 2024 and sell it today you would lose (246.00) from holding Xingguang Agricultural Mach or give up 24.62% of portfolio value over 90 days.

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

Fujian Longzhou Transportation  vs.  Xingguang Agricultural Mach

Fujian Longzhou Tran

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Longzhou Transportation are ranked lower than 3 (%) 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.

Xingguang Agricultural

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xingguang Agricultural Mach are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xingguang Agricultural may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Fujian Longzhou and Xingguang Agricultural

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

The idea behind Fujian Longzhou Transportation and Xingguang Agricultural Mach 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.