Correlation Between Cultural Investment and Fuda Alloy

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

By analyzing existing cross correlation between Cultural Investment Holdings and Fuda Alloy Materials, you can compare the effects of market volatilities on Cultural Investment and Fuda Alloy 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 Cultural Investment with a short position of Fuda Alloy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cultural Investment and Fuda Alloy.

Diversification Opportunities for Cultural Investment and Fuda Alloy

-0.46

Correlation Coefficient

Cultural Investment  Fuda Alloy

Very good diversification

The 3 months correlation between Cultural and Fuda is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Cultural Investment Holdings and Fuda Alloy Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuda Alloy Materials and Cultural Investment 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 Cultural Investment Holdings are associated (or correlated) with Fuda Alloy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuda Alloy Materials has no effect on the direction of Cultural Investment i.e., Cultural Investment and Fuda Alloy go up and down completely randomly.

Pair Corralation between Cultural Investment and Fuda Alloy

Assuming the 90 days trading horizon Cultural Investment Holdings is expected to under-perform the Fuda Alloy. But the stock apears to be less risky and, when comparing its historical volatility, Cultural Investment Holdings is 1.66 times less risky than Fuda Alloy. The stock trades about -0.01 of its potential returns per unit of risk. The Fuda Alloy Materials is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,224  in Fuda Alloy Materials on December 26, 2024 and sell it today you would earn a total of  411.00  from holding Fuda Alloy Materials or generate 33.58% return on investment over 90 days.

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

Cultural Investment Holdings  vs.  Fuda Alloy Materials

Cultural Investment

Risk-Adjusted Performance

Very Weak

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

Fuda Alloy Materials

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fuda Alloy Materials are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fuda Alloy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cultural Investment and Fuda Alloy

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

The idea behind Cultural Investment Holdings and Fuda Alloy Materials 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.