Correlation Between Hefei Metalforming and Fujian Nanwang

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

By analyzing existing cross correlation between Hefei Metalforming Mach and Fujian Nanwang Environment, you can compare the effects of market volatilities on Hefei Metalforming and Fujian Nanwang 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 Hefei Metalforming with a short position of Fujian Nanwang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hefei Metalforming and Fujian Nanwang.

Diversification Opportunities for Hefei Metalforming and Fujian Nanwang

0.02

Correlation Coefficient

Hefei Metalforming  Fujian Nanwang

Significant diversification

The 3 months correlation between Hefei and Fujian is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Hefei Metalforming Mach and Fujian Nanwang Environment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Nanwang Envir and Hefei Metalforming 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 Hefei Metalforming Mach are associated (or correlated) with Fujian Nanwang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Nanwang Envir has no effect on the direction of Hefei Metalforming i.e., Hefei Metalforming and Fujian Nanwang go up and down completely randomly.

Pair Corralation between Hefei Metalforming and Fujian Nanwang

Assuming the 90 days trading horizon Hefei Metalforming Mach is expected to generate 1.24 times more return on investment than Fujian Nanwang. However, Hefei Metalforming is 1.24 times more volatile than Fujian Nanwang Environment. It trades about 0.0 of its potential returns per unit of risk. Fujian Nanwang Environment is currently generating about -0.03 per unit of risk. If you would invest  894.00  in Hefei Metalforming Mach on October 15, 2024 and sell it today you would lose (228.00) from holding Hefei Metalforming Mach or give up 25.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	80.96%
Values	Daily Returns

Hefei Metalforming Mach  vs.  Fujian Nanwang Environment

Hefei Metalforming Mach

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hefei Metalforming Mach are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hefei Metalforming may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Fujian Nanwang Envir

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Nanwang Environment are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fujian Nanwang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hefei Metalforming and Fujian Nanwang

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

The idea behind Hefei Metalforming Mach and Fujian Nanwang Environment 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.