Correlation Between FDC International and ADLINK Technology

Can any of the company-specific risk be diversified away by investing in both FDC International and ADLINK Technology 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 FDC International and ADLINK Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FDC International Hotels and ADLINK Technology, you can compare the effects of market volatilities on FDC International and ADLINK Technology 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 FDC International with a short position of ADLINK Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of FDC International and ADLINK Technology.

Diversification Opportunities for FDC International and ADLINK Technology

0.49

Correlation Coefficient

FDC International  ADLINK Technology

Very weak diversification

The 3 months correlation between FDC and ADLINK is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding FDC International Hotels and ADLINK Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADLINK Technology and FDC International 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 FDC International Hotels are associated (or correlated) with ADLINK Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADLINK Technology has no effect on the direction of FDC International i.e., FDC International and ADLINK Technology go up and down completely randomly.

Pair Corralation between FDC International and ADLINK Technology

Assuming the 90 days trading horizon FDC International is expected to generate 3.51 times less return on investment than ADLINK Technology. But when comparing it to its historical volatility, FDC International Hotels is 1.34 times less risky than ADLINK Technology. It trades about 0.03 of its potential returns per unit of risk. ADLINK Technology is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6,740  in ADLINK Technology on September 18, 2024 and sell it today you would earn a total of  440.00  from holding ADLINK Technology or generate 6.53% return on investment over 90 days.

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

FDC International Hotels  vs.  ADLINK Technology

FDC International Hotels

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FDC International Hotels are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, FDC International is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ADLINK Technology

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ADLINK Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ADLINK Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with FDC International and ADLINK Technology

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

The idea behind FDC International Hotels and ADLINK Technology 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.

Check out your portfolio center.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.