Correlation Between Fujian Oriental and Chenzhou Jingui

Can any of the company-specific risk be diversified away by investing in both Fujian Oriental and Chenzhou Jingui 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 Chenzhou Jingui 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 Chenzhou Jingui Silver, you can compare the effects of market volatilities on Fujian Oriental and Chenzhou Jingui 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 Chenzhou Jingui. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fujian Oriental and Chenzhou Jingui.

Diversification Opportunities for Fujian Oriental and Chenzhou Jingui

0.58

Correlation Coefficient

Fujian Oriental  Chenzhou Jingui

Very weak diversification

The 3 months correlation between Fujian and Chenzhou is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Fujian Oriental Silver and Chenzhou Jingui Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chenzhou Jingui Silver 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 Chenzhou Jingui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chenzhou Jingui Silver has no effect on the direction of Fujian Oriental i.e., Fujian Oriental and Chenzhou Jingui go up and down completely randomly.

Pair Corralation between Fujian Oriental and Chenzhou Jingui

Assuming the 90 days trading horizon Fujian Oriental Silver is expected to under-perform the Chenzhou Jingui. In addition to that, Fujian Oriental is 1.34 times more volatile than Chenzhou Jingui Silver. It trades about -0.03 of its total potential returns per unit of risk. Chenzhou Jingui Silver is currently generating about 0.02 per unit of volatility. If you would invest  329.00  in Chenzhou Jingui Silver on October 23, 2024 and sell it today you would earn a total of  23.00  from holding Chenzhou Jingui Silver or generate 6.99% return on investment over 90 days.

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

Fujian Oriental Silver  vs.  Chenzhou Jingui Silver

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.

Chenzhou Jingui Silver

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fujian Oriental and Chenzhou Jingui

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

The idea behind Fujian Oriental Silver and Chenzhou Jingui Silver 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.