Correlation Between U Ming and Forest Water

Can any of the company-specific risk be diversified away by investing in both U Ming and Forest Water 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 U Ming and Forest Water into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between U Ming Marine Transport and Forest Water Environmental, you can compare the effects of market volatilities on U Ming and Forest Water 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 U Ming with a short position of Forest Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Ming and Forest Water.

Diversification Opportunities for U Ming and Forest Water

-0.56

Correlation Coefficient

U Ming  Forest Water

Excellent diversification

The 3 months correlation between 2606 and Forest is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding U Ming Marine Transport and Forest Water Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forest Water Environ and U Ming 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 U Ming Marine Transport are associated (or correlated) with Forest Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forest Water Environ has no effect on the direction of U Ming i.e., U Ming and Forest Water go up and down completely randomly.

Pair Corralation between U Ming and Forest Water

Assuming the 90 days trading horizon U Ming is expected to generate 1.19 times less return on investment than Forest Water. But when comparing it to its historical volatility, U Ming Marine Transport is 1.06 times less risky than Forest Water. It trades about 0.03 of its potential returns per unit of risk. Forest Water Environmental is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,925  in Forest Water Environmental on October 3, 2024 and sell it today you would earn a total of  675.00  from holding Forest Water Environmental or generate 23.08% return on investment over 90 days.

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

U Ming Marine Transport  vs.  Forest Water Environmental

U Ming Marine

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in U Ming Marine Transport are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, U Ming is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Forest Water Environ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forest Water Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with U Ming and Forest Water

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

The idea behind U Ming Marine Transport and Forest Water Environmental 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.