Correlation Between Fujian Oriental and Panda Financial

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

Diversification Opportunities for Fujian Oriental and Panda Financial

0.44

Correlation Coefficient

Fujian Oriental  Panda Financial

Very weak diversification

The 3 months correlation between Fujian and Panda is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Fujian Oriental Silver and Panda Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Panda Financial Holding 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 Panda Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Panda Financial Holding has no effect on the direction of Fujian Oriental i.e., Fujian Oriental and Panda Financial go up and down completely randomly.

Pair Corralation between Fujian Oriental and Panda Financial

Assuming the 90 days trading horizon Fujian Oriental Silver is expected to under-perform the Panda Financial. But the stock apears to be less risky and, when comparing its historical volatility, Fujian Oriental Silver is 1.38 times less risky than Panda Financial. The stock trades about -0.37 of its potential returns per unit of risk. The Panda Financial Holding is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest  1,520  in Panda Financial Holding on October 9, 2024 and sell it today you would lose (269.00) from holding Panda Financial Holding or give up 17.7% of portfolio value over 90 days.

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

Fujian Oriental Silver  vs.  Panda Financial Holding

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.

Panda Financial Holding

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Panda Financial Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Panda Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fujian Oriental and Panda Financial

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

The idea behind Fujian Oriental Silver and Panda Financial Holding 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.