Correlation Between ESUN Financial and Fusheng Precision

Can any of the company-specific risk be diversified away by investing in both ESUN Financial and Fusheng Precision 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 ESUN Financial and Fusheng Precision into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ESUN Financial Holding and Fusheng Precision Co, you can compare the effects of market volatilities on ESUN Financial and Fusheng Precision 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 ESUN Financial with a short position of Fusheng Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESUN Financial and Fusheng Precision.

Diversification Opportunities for ESUN Financial and Fusheng Precision

-0.44

Correlation Coefficient

ESUN Financial  Fusheng Precision

Very good diversification

The 3 months correlation between ESUN and Fusheng is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding ESUN Financial Holding and Fusheng Precision Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fusheng Precision and ESUN Financial 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 ESUN Financial Holding are associated (or correlated) with Fusheng Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fusheng Precision has no effect on the direction of ESUN Financial i.e., ESUN Financial and Fusheng Precision go up and down completely randomly.

Pair Corralation between ESUN Financial and Fusheng Precision

Assuming the 90 days trading horizon ESUN Financial is expected to generate 4.42 times less return on investment than Fusheng Precision. But when comparing it to its historical volatility, ESUN Financial Holding is 2.35 times less risky than Fusheng Precision. It trades about 0.09 of its potential returns per unit of risk. Fusheng Precision Co is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  28,850  in Fusheng Precision Co on September 19, 2024 and sell it today you would earn a total of  1,900  from holding Fusheng Precision Co or generate 6.59% return on investment over 90 days.

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

ESUN Financial Holding  vs.  Fusheng Precision Co

ESUN Financial Holding

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fusheng Precision

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fusheng Precision Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Fusheng Precision 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 ESUN Financial and Fusheng Precision

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

The idea behind ESUN Financial Holding and Fusheng Precision Co 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.