Correlation Between Zhangjiagang Freetrade and Fiberhome Telecommunicatio

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Can any of the company-specific risk be diversified away by investing in both Zhangjiagang Freetrade and Fiberhome Telecommunicatio 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 Zhangjiagang Freetrade and Fiberhome Telecommunicatio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Zhangjiagang Freetrade Science and Fiberhome Telecommunication Technologies, you can compare the effects of market volatilities on Zhangjiagang Freetrade and Fiberhome Telecommunicatio 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 Zhangjiagang Freetrade with a short position of Fiberhome Telecommunicatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhangjiagang Freetrade and Fiberhome Telecommunicatio.

Diversification Opportunities for Zhangjiagang Freetrade and Fiberhome Telecommunicatio

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Zhangjiagang and Fiberhome is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Zhangjiagang Freetrade Science and Fiberhome Telecommunication Te in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fiberhome Telecommunicatio and Zhangjiagang Freetrade 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 Zhangjiagang Freetrade Science are associated (or correlated) with Fiberhome Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fiberhome Telecommunicatio has no effect on the direction of Zhangjiagang Freetrade i.e., Zhangjiagang Freetrade and Fiberhome Telecommunicatio go up and down completely randomly.

Pair Corralation between Zhangjiagang Freetrade and Fiberhome Telecommunicatio

Assuming the 90 days trading horizon Zhangjiagang Freetrade Science is expected to generate 0.96 times more return on investment than Fiberhome Telecommunicatio. However, Zhangjiagang Freetrade Science is 1.04 times less risky than Fiberhome Telecommunicatio. It trades about 0.19 of its potential returns per unit of risk. Fiberhome Telecommunication Technologies is currently generating about 0.17 per unit of risk. If you would invest  298.00  in Zhangjiagang Freetrade Science on September 5, 2024 and sell it today you would earn a total of  102.00  from holding Zhangjiagang Freetrade Science or generate 34.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Zhangjiagang Freetrade Science  vs.  Fiberhome Telecommunication Te

 Performance 
       Timeline  
Zhangjiagang Freetrade 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Zhangjiagang Freetrade Science are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhangjiagang Freetrade sustained solid returns over the last few months and may actually be approaching a breakup point.
Fiberhome Telecommunicatio 

Risk-Adjusted Performance

13 of 100

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

Zhangjiagang Freetrade and Fiberhome Telecommunicatio Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Zhangjiagang Freetrade and Fiberhome Telecommunicatio

The main advantage of trading using opposite Zhangjiagang Freetrade and Fiberhome Telecommunicatio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhangjiagang Freetrade position performs unexpectedly, Fiberhome Telecommunicatio 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 Fiberhome Telecommunicatio will offset losses from the drop in Fiberhome Telecommunicatio's long position.
The idea behind Zhangjiagang Freetrade Science and Fiberhome Telecommunication Technologies 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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