Correlation Between Fortune Information and Wei Chuan

Can any of the company-specific risk be diversified away by investing in both Fortune Information and Wei Chuan 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 Fortune Information and Wei Chuan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fortune Information Systems and Wei Chuan Foods, you can compare the effects of market volatilities on Fortune Information and Wei Chuan 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 Fortune Information with a short position of Wei Chuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortune Information and Wei Chuan.

Diversification Opportunities for Fortune Information and Wei Chuan

0.03

Correlation Coefficient

Fortune Information  Wei Chuan

Significant diversification

The 3 months correlation between Fortune and Wei is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Information Systems and Wei Chuan Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wei Chuan Foods and Fortune Information 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 Fortune Information Systems are associated (or correlated) with Wei Chuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wei Chuan Foods has no effect on the direction of Fortune Information i.e., Fortune Information and Wei Chuan go up and down completely randomly.

Pair Corralation between Fortune Information and Wei Chuan

Assuming the 90 days trading horizon Fortune Information Systems is expected to generate 10.93 times more return on investment than Wei Chuan. However, Fortune Information is 10.93 times more volatile than Wei Chuan Foods. It trades about 0.35 of its potential returns per unit of risk. Wei Chuan Foods is currently generating about 0.03 per unit of risk. If you would invest  2,615  in Fortune Information Systems on December 5, 2024 and sell it today you would earn a total of  1,170  from holding Fortune Information Systems or generate 44.74% return on investment over 90 days.

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

Fortune Information Systems  vs.  Wei Chuan Foods

Fortune Information

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fortune Information Systems are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Fortune Information showed solid returns over the last few months and may actually be approaching a breakup point.

Wei Chuan Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wei Chuan Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Wei Chuan is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Fortune Information and Wei Chuan

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

The idea behind Fortune Information Systems and Wei Chuan Foods 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.