Correlation Between Fibocom Wireless and Dongjiang Environmental

Can any of the company-specific risk be diversified away by investing in both Fibocom Wireless and Dongjiang Environmental 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 Fibocom Wireless and Dongjiang Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fibocom Wireless and Dongjiang Environmental Co, you can compare the effects of market volatilities on Fibocom Wireless and Dongjiang Environmental 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 Fibocom Wireless with a short position of Dongjiang Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fibocom Wireless and Dongjiang Environmental.

Diversification Opportunities for Fibocom Wireless and Dongjiang Environmental

-0.17

Correlation Coefficient

Fibocom Wireless  Dongjiang Environmental

Good diversification

The 3 months correlation between Fibocom and Dongjiang is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Fibocom Wireless and Dongjiang Environmental Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongjiang Environmental and Fibocom Wireless 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 Fibocom Wireless are associated (or correlated) with Dongjiang Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongjiang Environmental has no effect on the direction of Fibocom Wireless i.e., Fibocom Wireless and Dongjiang Environmental go up and down completely randomly.

Pair Corralation between Fibocom Wireless and Dongjiang Environmental

Assuming the 90 days trading horizon Fibocom Wireless is expected to generate 2.7 times more return on investment than Dongjiang Environmental. However, Fibocom Wireless is 2.7 times more volatile than Dongjiang Environmental Co. It trades about 0.14 of its potential returns per unit of risk. Dongjiang Environmental Co is currently generating about -0.01 per unit of risk. If you would invest  2,163  in Fibocom Wireless on December 27, 2024 and sell it today you would earn a total of  956.00  from holding Fibocom Wireless or generate 44.2% return on investment over 90 days.

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

Fibocom Wireless  vs.  Dongjiang Environmental Co

Fibocom Wireless

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fibocom Wireless are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fibocom Wireless sustained solid returns over the last few months and may actually be approaching a breakup point.

Dongjiang Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dongjiang Environmental Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dongjiang Environmental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fibocom Wireless and Dongjiang Environmental

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

The idea behind Fibocom Wireless and Dongjiang Environmental 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.