Correlation Between Feng Ching and Yuan High

Can any of the company-specific risk be diversified away by investing in both Feng Ching and Yuan High 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 Feng Ching and Yuan High into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Feng Ching Metal and Yuan High Tech Development, you can compare the effects of market volatilities on Feng Ching and Yuan High 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 Feng Ching with a short position of Yuan High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Feng Ching and Yuan High.

Diversification Opportunities for Feng Ching and Yuan High

-0.15

Correlation Coefficient

Feng Ching  Yuan High

Good diversification

The 3 months correlation between Feng and Yuan is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Feng Ching Metal and Yuan High Tech Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuan High Tech and Feng Ching 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 Feng Ching Metal are associated (or correlated) with Yuan High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuan High Tech has no effect on the direction of Feng Ching i.e., Feng Ching and Yuan High go up and down completely randomly.

Pair Corralation between Feng Ching and Yuan High

Assuming the 90 days trading horizon Feng Ching Metal is expected to generate 0.66 times more return on investment than Yuan High. However, Feng Ching Metal is 1.52 times less risky than Yuan High. It trades about 0.11 of its potential returns per unit of risk. Yuan High Tech Development is currently generating about 0.04 per unit of risk. If you would invest  1,820  in Feng Ching Metal on December 20, 2024 and sell it today you would earn a total of  310.00  from holding Feng Ching Metal or generate 17.03% return on investment over 90 days.

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

Feng Ching Metal  vs.  Yuan High Tech Development

Feng Ching Metal

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Feng Ching Metal are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Feng Ching showed solid returns over the last few months and may actually be approaching a breakup point.

Yuan High Tech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yuan High Tech Development are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Yuan High may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Feng Ching and Yuan High

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

The idea behind Feng Ching Metal and Yuan High Tech Development 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.