Correlation Between Fanhua and NEW MILLENNIUM

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

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

Diversification Opportunities for Fanhua and NEW MILLENNIUM

-0.54

Correlation Coefficient

Fanhua  NEW MILLENNIUM

Excellent diversification

The 3 months correlation between Fanhua and NEW is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Fanhua Inc and NEW MILLENNIUM IRON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEW MILLENNIUM IRON and Fanhua 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 Fanhua Inc are associated (or correlated) with NEW MILLENNIUM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEW MILLENNIUM IRON has no effect on the direction of Fanhua i.e., Fanhua and NEW MILLENNIUM go up and down completely randomly.

Pair Corralation between Fanhua and NEW MILLENNIUM

Assuming the 90 days trading horizon Fanhua Inc is expected to under-perform the NEW MILLENNIUM. But the stock apears to be less risky and, when comparing its historical volatility, Fanhua Inc is 2.19 times less risky than NEW MILLENNIUM. The stock trades about -0.07 of its potential returns per unit of risk. The NEW MILLENNIUM IRON is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  184.00  in NEW MILLENNIUM IRON on October 11, 2024 and sell it today you would earn a total of  621.00  from holding NEW MILLENNIUM IRON or generate 337.5% return on investment over 90 days.

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

Fanhua Inc  vs.  NEW MILLENNIUM IRON

Fanhua Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fanhua Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

NEW MILLENNIUM IRON

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NEW MILLENNIUM IRON are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, NEW MILLENNIUM exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fanhua and NEW MILLENNIUM

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

The idea behind Fanhua Inc and NEW MILLENNIUM IRON 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.