Correlation Between Fuda Alloy and Hubeiyichang Transportation

Can any of the company-specific risk be diversified away by investing in both Fuda Alloy and Hubeiyichang Transportation 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 Fuda Alloy and Hubeiyichang Transportation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fuda Alloy Materials and Hubeiyichang Transportation Group, you can compare the effects of market volatilities on Fuda Alloy and Hubeiyichang Transportation 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 Fuda Alloy with a short position of Hubeiyichang Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fuda Alloy and Hubeiyichang Transportation.

Diversification Opportunities for Fuda Alloy and Hubeiyichang Transportation

0.68

Correlation Coefficient

Fuda Alloy  Hubeiyichang Transportation

Poor diversification

The 3 months correlation between Fuda and Hubeiyichang is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Fuda Alloy Materials and Hubeiyichang Transportation Gr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hubeiyichang Transportation and Fuda Alloy 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 Fuda Alloy Materials are associated (or correlated) with Hubeiyichang Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hubeiyichang Transportation has no effect on the direction of Fuda Alloy i.e., Fuda Alloy and Hubeiyichang Transportation go up and down completely randomly.

Pair Corralation between Fuda Alloy and Hubeiyichang Transportation

Assuming the 90 days trading horizon Fuda Alloy Materials is expected to generate 1.64 times more return on investment than Hubeiyichang Transportation. However, Fuda Alloy is 1.64 times more volatile than Hubeiyichang Transportation Group. It trades about -0.02 of its potential returns per unit of risk. Hubeiyichang Transportation Group is currently generating about -0.32 per unit of risk. If you would invest  1,389  in Fuda Alloy Materials on October 12, 2024 and sell it today you would lose (36.00) from holding Fuda Alloy Materials or give up 2.59% of portfolio value over 90 days.

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

Fuda Alloy Materials  vs.  Hubeiyichang Transportation Gr

Fuda Alloy Materials

Risk-Adjusted Performance

7 of 100

OK

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

Hubeiyichang Transportation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fuda Alloy and Hubeiyichang Transportation

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

The idea behind Fuda Alloy Materials and Hubeiyichang Transportation Group 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.