Correlation Between Xingguang Agricultural and Fujian Green

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

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

Diversification Opportunities for Xingguang Agricultural and Fujian Green

0.88

Correlation Coefficient

Xingguang Agricultural  Fujian Green

Very poor diversification

The 3 months correlation between Xingguang and Fujian is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Xingguang Agricultural Mach and Fujian Green Pine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Green Pine and Xingguang Agricultural 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 Xingguang Agricultural Mach are associated (or correlated) with Fujian Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Green Pine has no effect on the direction of Xingguang Agricultural i.e., Xingguang Agricultural and Fujian Green go up and down completely randomly.

Pair Corralation between Xingguang Agricultural and Fujian Green

Assuming the 90 days trading horizon Xingguang Agricultural Mach is expected to under-perform the Fujian Green. In addition to that, Xingguang Agricultural is 1.65 times more volatile than Fujian Green Pine. It trades about -0.29 of its total potential returns per unit of risk. Fujian Green Pine is currently generating about -0.12 per unit of volatility. If you would invest  525.00  in Fujian Green Pine on October 24, 2024 and sell it today you would lose (26.00) from holding Fujian Green Pine or give up 4.95% of portfolio value over 90 days.

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

Xingguang Agricultural Mach  vs.  Fujian Green Pine

Xingguang Agricultural

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fujian Green Pine

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Green Pine are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fujian Green may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Xingguang Agricultural and Fujian Green

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

The idea behind Xingguang Agricultural Mach and Fujian Green Pine 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.