Correlation Between Fujian Nanwang and GreenTech Environmental

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

Diversification Opportunities for Fujian Nanwang and GreenTech Environmental

0.83

Correlation Coefficient

Fujian Nanwang  GreenTech Environmental

Very poor diversification

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

Pair Corralation between Fujian Nanwang and GreenTech Environmental

Assuming the 90 days trading horizon Fujian Nanwang Environment is expected to under-perform the GreenTech Environmental. But the stock apears to be less risky and, when comparing its historical volatility, Fujian Nanwang Environment is 1.18 times less risky than GreenTech Environmental. The stock trades about -0.02 of its potential returns per unit of risk. The GreenTech Environmental Co is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,742  in GreenTech Environmental Co on September 30, 2024 and sell it today you would lose (353.00) from holding GreenTech Environmental Co or give up 20.26% of portfolio value over 90 days.

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

Fujian Nanwang Environment  vs.  GreenTech Environmental Co

Fujian Nanwang Envir

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Nanwang Environment are ranked lower than 6 (%) 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.

GreenTech Environmental

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Fujian Nanwang and GreenTech Environmental

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

The idea behind Fujian Nanwang Environment and GreenTech 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.