Correlation Between Fujian Forecam and Sichuan Swellfun

Can any of the company-specific risk be diversified away by investing in both Fujian Forecam and Sichuan Swellfun 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 Sichuan Swellfun 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 Sichuan Swellfun Co, you can compare the effects of market volatilities on Fujian Forecam and Sichuan Swellfun 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 Sichuan Swellfun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fujian Forecam and Sichuan Swellfun.

Diversification Opportunities for Fujian Forecam and Sichuan Swellfun

0.94

Correlation Coefficient

Fujian Forecam  Sichuan Swellfun

Almost no diversification

The 3 months correlation between Fujian and Sichuan is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Fujian Forecam Optics and Sichuan Swellfun Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Swellfun 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 Sichuan Swellfun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Swellfun has no effect on the direction of Fujian Forecam i.e., Fujian Forecam and Sichuan Swellfun go up and down completely randomly.

Pair Corralation between Fujian Forecam and Sichuan Swellfun

Assuming the 90 days trading horizon Fujian Forecam Optics is expected to generate 1.64 times more return on investment than Sichuan Swellfun. However, Fujian Forecam is 1.64 times more volatile than Sichuan Swellfun Co. It trades about 0.24 of its potential returns per unit of risk. Sichuan Swellfun Co is currently generating about 0.25 per unit of risk. If you would invest  1,429  in Fujian Forecam Optics on September 5, 2024 and sell it today you would earn a total of  1,923  from holding Fujian Forecam Optics or generate 134.57% 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.  Sichuan Swellfun Co

Fujian Forecam Optics

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Forecam Optics are ranked lower than 18 (%) 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.

Sichuan Swellfun

Risk-Adjusted Performance

19 of 100

Solid

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

Pair Trading with Fujian Forecam and Sichuan Swellfun

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

The idea behind Fujian Forecam Optics and Sichuan Swellfun 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.