Correlation Between Fiberhome Telecommunicatio and Guangzhou Dongfang

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

By analyzing existing cross correlation between Fiberhome Telecommunication Technologies and Guangzhou Dongfang Hotel, you can compare the effects of market volatilities on Fiberhome Telecommunicatio and Guangzhou Dongfang 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 Fiberhome Telecommunicatio with a short position of Guangzhou Dongfang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fiberhome Telecommunicatio and Guangzhou Dongfang.

Diversification Opportunities for Fiberhome Telecommunicatio and Guangzhou Dongfang

-0.22

Correlation Coefficient

Fiberhome Telecommunicatio  Guangzhou Dongfang

Very good diversification

The 3 months correlation between Fiberhome and Guangzhou is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Fiberhome Telecommunication Te and Guangzhou Dongfang Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Dongfang Hotel and Fiberhome Telecommunicatio 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 Fiberhome Telecommunication Technologies are associated (or correlated) with Guangzhou Dongfang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Dongfang Hotel has no effect on the direction of Fiberhome Telecommunicatio i.e., Fiberhome Telecommunicatio and Guangzhou Dongfang go up and down completely randomly.

Pair Corralation between Fiberhome Telecommunicatio and Guangzhou Dongfang

Assuming the 90 days trading horizon Fiberhome Telecommunication Technologies is expected to generate 1.53 times more return on investment than Guangzhou Dongfang. However, Fiberhome Telecommunicatio is 1.53 times more volatile than Guangzhou Dongfang Hotel. It trades about 0.15 of its potential returns per unit of risk. Guangzhou Dongfang Hotel is currently generating about -0.06 per unit of risk. If you would invest  1,853  in Fiberhome Telecommunication Technologies on December 2, 2024 and sell it today you would earn a total of  597.00  from holding Fiberhome Telecommunication Technologies or generate 32.22% return on investment over 90 days.

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

Fiberhome Telecommunication Te  vs.  Guangzhou Dongfang Hotel

Fiberhome Telecommunicatio

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fiberhome Telecommunication Technologies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fiberhome Telecommunicatio sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangzhou Dongfang Hotel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangzhou Dongfang Hotel 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 Fiberhome Telecommunicatio and Guangzhou Dongfang

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

The idea behind Fiberhome Telecommunication Technologies and Guangzhou Dongfang Hotel 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..