Correlation Between Tonghua Grape and Fujian Boss

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

By analyzing existing cross correlation between Tonghua Grape Wine and Fujian Boss Software, you can compare the effects of market volatilities on Tonghua Grape and Fujian Boss 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 Tonghua Grape with a short position of Fujian Boss. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tonghua Grape and Fujian Boss.

Diversification Opportunities for Tonghua Grape and Fujian Boss

0.44

Correlation Coefficient

Tonghua Grape  Fujian Boss

Very weak diversification

The 3 months correlation between Tonghua and Fujian is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Tonghua Grape Wine and Fujian Boss Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Boss Software and Tonghua Grape 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 Tonghua Grape Wine are associated (or correlated) with Fujian Boss. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Boss Software has no effect on the direction of Tonghua Grape i.e., Tonghua Grape and Fujian Boss go up and down completely randomly.

Pair Corralation between Tonghua Grape and Fujian Boss

Assuming the 90 days trading horizon Tonghua Grape Wine is expected to generate 0.69 times more return on investment than Fujian Boss. However, Tonghua Grape Wine is 1.44 times less risky than Fujian Boss. It trades about 0.05 of its potential returns per unit of risk. Fujian Boss Software is currently generating about -0.03 per unit of risk. If you would invest  261.00  in Tonghua Grape Wine on October 10, 2024 and sell it today you would earn a total of  17.00  from holding Tonghua Grape Wine or generate 6.51% return on investment over 90 days.

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

Tonghua Grape Wine  vs.  Fujian Boss Software

Tonghua Grape Wine

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tonghua Grape Wine are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tonghua Grape may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Fujian Boss Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fujian Boss Software 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 Tonghua Grape and Fujian Boss

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

The idea behind Tonghua Grape Wine and Fujian Boss Software 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.