Correlation Between China Fortune and Wonders Information

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

By analyzing existing cross correlation between China Fortune Land and Wonders Information, you can compare the effects of market volatilities on China Fortune and Wonders Information 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 China Fortune with a short position of Wonders Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Fortune and Wonders Information.

Diversification Opportunities for China Fortune and Wonders Information

0.54

Correlation Coefficient

China Fortune  Wonders Information

Very weak diversification

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

Pair Corralation between China Fortune and Wonders Information

Assuming the 90 days trading horizon China Fortune Land is expected to generate 1.34 times more return on investment than Wonders Information. However, China Fortune is 1.34 times more volatile than Wonders Information. It trades about 0.13 of its potential returns per unit of risk. Wonders Information is currently generating about -0.04 per unit of risk. If you would invest  165.00  in China Fortune Land on October 8, 2024 and sell it today you would earn a total of  85.00  from holding China Fortune Land or generate 51.52% return on investment over 90 days.

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

China Fortune Land  vs.  Wonders Information

China Fortune Land

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Fortune Land are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Fortune sustained solid returns over the last few months and may actually be approaching a breakup point.

Wonders Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wonders Information has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with China Fortune and Wonders Information

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

The idea behind China Fortune Land and Wonders Information 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.