Correlation Between Shanghai Phichem and Fiberhome Telecommunicatio

Can any of the company-specific risk be diversified away by investing in both Shanghai Phichem and Fiberhome Telecommunicatio 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 Shanghai Phichem and Fiberhome Telecommunicatio into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shanghai Phichem Material and Fiberhome Telecommunication Technologies, you can compare the effects of market volatilities on Shanghai Phichem and Fiberhome Telecommunicatio 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 Shanghai Phichem with a short position of Fiberhome Telecommunicatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Phichem and Fiberhome Telecommunicatio.

Diversification Opportunities for Shanghai Phichem and Fiberhome Telecommunicatio

0.32

Correlation Coefficient

Shanghai Phichem  Fiberhome Telecommunicatio

Weak diversification

The 3 months correlation between Shanghai and Fiberhome is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Phichem Material and Fiberhome Telecommunication Te in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fiberhome Telecommunicatio and Shanghai Phichem 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 Shanghai Phichem Material are associated (or correlated) with Fiberhome Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fiberhome Telecommunicatio has no effect on the direction of Shanghai Phichem i.e., Shanghai Phichem and Fiberhome Telecommunicatio go up and down completely randomly.

Pair Corralation between Shanghai Phichem and Fiberhome Telecommunicatio

Assuming the 90 days trading horizon Shanghai Phichem Material is expected to under-perform the Fiberhome Telecommunicatio. But the stock apears to be less risky and, when comparing its historical volatility, Shanghai Phichem Material is 1.44 times less risky than Fiberhome Telecommunicatio. The stock trades about -0.08 of its potential returns per unit of risk. The Fiberhome Telecommunication Technologies is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,902  in Fiberhome Telecommunication Technologies on October 23, 2024 and sell it today you would earn a total of  18.00  from holding Fiberhome Telecommunication Technologies or generate 0.95% return on investment over 90 days.

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

Shanghai Phichem Material  vs.  Fiberhome Telecommunication Te

Shanghai Phichem Material

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Phichem Material are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Phichem may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Fiberhome Telecommunicatio

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fiberhome Telecommunication Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fiberhome Telecommunicatio may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Shanghai Phichem and Fiberhome Telecommunicatio

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

The idea behind Shanghai Phichem Material and Fiberhome Telecommunication Technologies 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.