Correlation Between Fujian Oriental and Hubei Geoway

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

Diversification Opportunities for Fujian Oriental and Hubei Geoway

0.25

Correlation Coefficient

Fujian Oriental  Hubei Geoway

Modest diversification

The 3 months correlation between Fujian and Hubei is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Fujian Oriental Silver and Hubei Geoway Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hubei Geoway Investment 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 Hubei Geoway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hubei Geoway Investment has no effect on the direction of Fujian Oriental i.e., Fujian Oriental and Hubei Geoway go up and down completely randomly.

Pair Corralation between Fujian Oriental and Hubei Geoway

Assuming the 90 days trading horizon Fujian Oriental Silver is expected to under-perform the Hubei Geoway. In addition to that, Fujian Oriental is 1.35 times more volatile than Hubei Geoway Investment. It trades about -0.02 of its total potential returns per unit of risk. Hubei Geoway Investment is currently generating about 0.01 per unit of volatility. If you would invest  207.00  in Hubei Geoway Investment on September 20, 2024 and sell it today you would lose (13.00) from holding Hubei Geoway Investment or give up 6.28% of portfolio value over 90 days.

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

Fujian Oriental Silver  vs.  Hubei Geoway Investment

Fujian Oriental Silver

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Oriental Silver are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fujian Oriental sustained solid returns over the last few months and may actually be approaching a breakup point.

Hubei Geoway Investment

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hubei Geoway Investment are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hubei Geoway sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fujian Oriental and Hubei Geoway

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

The idea behind Fujian Oriental Silver and Hubei Geoway Investment 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.