Correlation Between Mengtian Home and Fujian Nanwang

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

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

Diversification Opportunities for Mengtian Home and Fujian Nanwang

0.7

Correlation Coefficient

Mengtian Home  Fujian Nanwang

Poor diversification

The 3 months correlation between Mengtian and Fujian is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Mengtian Home Group 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 Mengtian Home 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 Mengtian Home Group 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 Mengtian Home i.e., Mengtian Home and Fujian Nanwang go up and down completely randomly.

Pair Corralation between Mengtian Home and Fujian Nanwang

Assuming the 90 days trading horizon Mengtian Home Group is expected to generate 2.3 times more return on investment than Fujian Nanwang. However, Mengtian Home is 2.3 times more volatile than Fujian Nanwang Environment. It trades about 0.07 of its potential returns per unit of risk. Fujian Nanwang Environment is currently generating about 0.15 per unit of risk. If you would invest  1,029  in Mengtian Home Group on October 7, 2024 and sell it today you would earn a total of  90.00  from holding Mengtian Home Group or generate 8.75% return on investment over 90 days.

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

Mengtian Home Group  vs.  Fujian Nanwang Environment

Mengtian Home Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mengtian Home Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Mengtian Home is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fujian Nanwang Envir

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Nanwang Environment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Fujian Nanwang is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mengtian Home and Fujian Nanwang

The main advantage of trading using opposite Mengtian Home and Fujian Nanwang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mengtian Home 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 Mengtian Home Group 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.

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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.