Correlation Between Long Bon and Farglory Land

Can any of the company-specific risk be diversified away by investing in both Long Bon and Farglory Land 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 Long Bon and Farglory Land into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Long Bon International and Farglory Land Development, you can compare the effects of market volatilities on Long Bon and Farglory Land 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 Long Bon with a short position of Farglory Land. Check out your portfolio center. Please also check ongoing floating volatility patterns of Long Bon and Farglory Land.

Diversification Opportunities for Long Bon and Farglory Land

-0.43

Correlation Coefficient

Long Bon  Farglory Land

Very good diversification

The 3 months correlation between Long and Farglory is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Long Bon International and Farglory Land Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farglory Land Development and Long Bon 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 Long Bon International are associated (or correlated) with Farglory Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farglory Land Development has no effect on the direction of Long Bon i.e., Long Bon and Farglory Land go up and down completely randomly.

Pair Corralation between Long Bon and Farglory Land

Assuming the 90 days trading horizon Long Bon International is expected to under-perform the Farglory Land. But the stock apears to be less risky and, when comparing its historical volatility, Long Bon International is 2.82 times less risky than Farglory Land. The stock trades about -0.18 of its potential returns per unit of risk. The Farglory Land Development is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  6,820  in Farglory Land Development on September 25, 2024 and sell it today you would earn a total of  1,190  from holding Farglory Land Development or generate 17.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.67%
Values	Daily Returns

Long Bon International  vs.  Farglory Land Development

Long Bon International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Farglory Land Development

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Farglory Land Development are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Farglory Land showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Long Bon and Farglory Land

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

The idea behind Long Bon International and Farglory Land 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.