Correlation Between NEW MILLENNIUM and FUYO GENERAL

Can any of the company-specific risk be diversified away by investing in both NEW MILLENNIUM and FUYO GENERAL 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 NEW MILLENNIUM and FUYO GENERAL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NEW MILLENNIUM IRON and FUYO GENERAL LEASE, you can compare the effects of market volatilities on NEW MILLENNIUM and FUYO GENERAL 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 NEW MILLENNIUM with a short position of FUYO GENERAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEW MILLENNIUM and FUYO GENERAL.

Diversification Opportunities for NEW MILLENNIUM and FUYO GENERAL

0.25

Correlation Coefficient

NEW MILLENNIUM  FUYO GENERAL

Modest diversification

The 3 months correlation between NEW and FUYO is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding NEW MILLENNIUM IRON and FUYO GENERAL LEASE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FUYO GENERAL LEASE and NEW MILLENNIUM 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 NEW MILLENNIUM IRON are associated (or correlated) with FUYO GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FUYO GENERAL LEASE has no effect on the direction of NEW MILLENNIUM i.e., NEW MILLENNIUM and FUYO GENERAL go up and down completely randomly.

Pair Corralation between NEW MILLENNIUM and FUYO GENERAL

Assuming the 90 days trading horizon NEW MILLENNIUM IRON is expected to under-perform the FUYO GENERAL. In addition to that, NEW MILLENNIUM is 2.32 times more volatile than FUYO GENERAL LEASE. It trades about -0.04 of its total potential returns per unit of risk. FUYO GENERAL LEASE is currently generating about 0.22 per unit of volatility. If you would invest  6,950  in FUYO GENERAL LEASE on October 8, 2024 and sell it today you would earn a total of  250.00  from holding FUYO GENERAL LEASE or generate 3.6% return on investment over 90 days.

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

NEW MILLENNIUM IRON  vs.  FUYO GENERAL LEASE

NEW MILLENNIUM IRON

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NEW MILLENNIUM IRON are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, NEW MILLENNIUM may actually be approaching a critical reversion point that can send shares even higher in February 2025.

FUYO GENERAL LEASE

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FUYO GENERAL LEASE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FUYO GENERAL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NEW MILLENNIUM and FUYO GENERAL

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

The idea behind NEW MILLENNIUM IRON and FUYO GENERAL LEASE 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.