Correlation Between Fujian Forecam and Aurora Optoelectronics

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

By analyzing existing cross correlation between Fujian Forecam Optics and Aurora Optoelectronics Co, you can compare the effects of market volatilities on Fujian Forecam and Aurora Optoelectronics 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 Fujian Forecam with a short position of Aurora Optoelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fujian Forecam and Aurora Optoelectronics.

Diversification Opportunities for Fujian Forecam and Aurora Optoelectronics

0.91

Correlation Coefficient

Fujian Forecam  Aurora Optoelectronics

Almost no diversification

The 3 months correlation between Fujian and Aurora is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Fujian Forecam Optics and Aurora Optoelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Optoelectronics and Fujian Forecam 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 Fujian Forecam Optics are associated (or correlated) with Aurora Optoelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Optoelectronics has no effect on the direction of Fujian Forecam i.e., Fujian Forecam and Aurora Optoelectronics go up and down completely randomly.

Pair Corralation between Fujian Forecam and Aurora Optoelectronics

Assuming the 90 days trading horizon Fujian Forecam Optics is expected to under-perform the Aurora Optoelectronics. In addition to that, Fujian Forecam is 1.13 times more volatile than Aurora Optoelectronics Co. It trades about -0.15 of its total potential returns per unit of risk. Aurora Optoelectronics Co is currently generating about 0.15 per unit of volatility. If you would invest  271.00  in Aurora Optoelectronics Co on September 13, 2024 and sell it today you would earn a total of  41.00  from holding Aurora Optoelectronics Co or generate 15.13% return on investment over 90 days.

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

Fujian Forecam Optics  vs.  Aurora Optoelectronics Co

Fujian Forecam Optics

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Forecam Optics are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fujian Forecam sustained solid returns over the last few months and may actually be approaching a breakup point.

Aurora Optoelectronics

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Optoelectronics Co are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aurora Optoelectronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fujian Forecam and Aurora Optoelectronics

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

The idea behind Fujian Forecam Optics and Aurora Optoelectronics Co 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .