Correlation Between Fujian Nanwang and Advanced Technology

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

By analyzing existing cross correlation between Fujian Nanwang Environment and Advanced Technology Materials, you can compare the effects of market volatilities on Fujian Nanwang and Advanced 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 Fujian Nanwang with a short position of Advanced Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fujian Nanwang and Advanced Technology.

Diversification Opportunities for Fujian Nanwang and Advanced Technology

0.83

Correlation Coefficient

Fujian Nanwang  Advanced Technology

Very poor diversification

The 3 months correlation between Fujian and Advanced is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Fujian Nanwang Environment and Advanced Technology Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Technology and Fujian Nanwang 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 Fujian Nanwang Environment are associated (or correlated) with Advanced Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Technology has no effect on the direction of Fujian Nanwang i.e., Fujian Nanwang and Advanced Technology go up and down completely randomly.

Pair Corralation between Fujian Nanwang and Advanced Technology

Assuming the 90 days trading horizon Fujian Nanwang Environment is expected to under-perform the Advanced Technology. In addition to that, Fujian Nanwang is 1.13 times more volatile than Advanced Technology Materials. It trades about -0.04 of its total potential returns per unit of risk. Advanced Technology Materials is currently generating about 0.04 per unit of volatility. If you would invest  800.00  in Advanced Technology Materials on September 28, 2024 and sell it today you would earn a total of  336.00  from holding Advanced Technology Materials or generate 42.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	78.83%
Values	Daily Returns

Fujian Nanwang Environment  vs.  Advanced Technology Materials

Fujian Nanwang Envir

Risk-Adjusted Performance

5 of 100

OK

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

Advanced Technology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Technology Materials are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Advanced Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fujian Nanwang and Advanced Technology

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

The idea behind Fujian Nanwang Environment and Advanced Technology Materials 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.