Correlation Between Fujian Nanwang and Wangneng Environment

Can any of the company-specific risk be diversified away by investing in both Fujian Nanwang and Wangneng Environment 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 Wangneng Environment 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 Wangneng Environment Co, you can compare the effects of market volatilities on Fujian Nanwang and Wangneng Environment 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 Wangneng Environment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fujian Nanwang and Wangneng Environment.

Diversification Opportunities for Fujian Nanwang and Wangneng Environment

0.2

Correlation Coefficient

Fujian Nanwang  Wangneng Environment

Modest diversification

The 3 months correlation between Fujian and Wangneng is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Fujian Nanwang Environment and Wangneng Environment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wangneng Environment 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 Wangneng Environment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wangneng Environment has no effect on the direction of Fujian Nanwang i.e., Fujian Nanwang and Wangneng Environment go up and down completely randomly.

Pair Corralation between Fujian Nanwang and Wangneng Environment

Assuming the 90 days trading horizon Fujian Nanwang Environment is expected to generate 1.08 times more return on investment than Wangneng Environment. However, Fujian Nanwang is 1.08 times more volatile than Wangneng Environment Co. It trades about 0.25 of its potential returns per unit of risk. Wangneng Environment Co is currently generating about -0.07 per unit of risk. If you would invest  1,104  in Fujian Nanwang Environment on October 12, 2024 and sell it today you would earn a total of  316.00  from holding Fujian Nanwang Environment or generate 28.62% return on investment over 90 days.

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

Fujian Nanwang Environment  vs.  Wangneng Environment Co

Fujian Nanwang Envir

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Nanwang Environment are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fujian Nanwang sustained solid returns over the last few months and may actually be approaching a breakup point.

Wangneng Environment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wangneng Environment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Fujian Nanwang and Wangneng Environment

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

The idea behind Fujian Nanwang Environment and Wangneng Environment 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.