Correlation Between Fujian Oriental and GEM

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

By analyzing existing cross correlation between Fujian Oriental Silver and GEM Co, you can compare the effects of market volatilities on Fujian Oriental and GEM 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 Fujian Oriental with a short position of GEM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fujian Oriental and GEM.

Diversification Opportunities for Fujian Oriental and GEM

0.47

Correlation Coefficient

Fujian Oriental  GEM

Very weak diversification

The 3 months correlation between Fujian and GEM is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Fujian Oriental Silver and GEM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEM Co and Fujian Oriental 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 Fujian Oriental Silver are associated (or correlated) with GEM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEM Co has no effect on the direction of Fujian Oriental i.e., Fujian Oriental and GEM go up and down completely randomly.

Pair Corralation between Fujian Oriental and GEM

Assuming the 90 days trading horizon Fujian Oriental Silver is expected to under-perform the GEM. In addition to that, Fujian Oriental is 1.74 times more volatile than GEM Co. It trades about -0.03 of its total potential returns per unit of risk. GEM Co is currently generating about -0.01 per unit of volatility. If you would invest  757.00  in GEM Co on October 10, 2024 and sell it today you would lose (115.00) from holding GEM Co or give up 15.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Fujian Oriental Silver  vs.  GEM Co

Fujian Oriental Silver

Risk-Adjusted Performance

0 of 100

Very Weak

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

GEM Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEM Co 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 Fujian Oriental and GEM

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

The idea behind Fujian Oriental Silver and GEM Co 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.