Correlation Between Fiberhome Telecommunicatio and Shanghai Phichem

Can any of the company-specific risk be diversified away by investing in both Fiberhome Telecommunicatio and Shanghai Phichem 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 Shanghai Phichem 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 Shanghai Phichem Material, you can compare the effects of market volatilities on Fiberhome Telecommunicatio and Shanghai Phichem 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 Shanghai Phichem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fiberhome Telecommunicatio and Shanghai Phichem.

Diversification Opportunities for Fiberhome Telecommunicatio and Shanghai Phichem

0.55

Correlation Coefficient

Fiberhome Telecommunicatio  Shanghai Phichem

Very weak diversification

The 3 months correlation between Fiberhome and Shanghai is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Fiberhome Telecommunication Te and Shanghai Phichem Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Phichem Material 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 Shanghai Phichem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Phichem Material has no effect on the direction of Fiberhome Telecommunicatio i.e., Fiberhome Telecommunicatio and Shanghai Phichem go up and down completely randomly.

Pair Corralation between Fiberhome Telecommunicatio and Shanghai Phichem

Assuming the 90 days trading horizon Fiberhome Telecommunication Technologies is expected to generate 0.65 times more return on investment than Shanghai Phichem. However, Fiberhome Telecommunication Technologies is 1.54 times less risky than Shanghai Phichem. It trades about -0.03 of its potential returns per unit of risk. Shanghai Phichem Material is currently generating about -0.04 per unit of risk. If you would invest  1,851  in Fiberhome Telecommunication Technologies on October 8, 2024 and sell it today you would lose (126.00) from holding Fiberhome Telecommunication Technologies or give up 6.81% of portfolio value over 90 days.

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

Fiberhome Telecommunication Te  vs.  Shanghai Phichem Material

Fiberhome Telecommunicatio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fiberhome Telecommunication Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fiberhome Telecommunicatio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shanghai Phichem Material

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai Phichem Material 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 Shanghai Phichem

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

The idea behind Fiberhome Telecommunication Technologies and Shanghai Phichem Material 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.