Correlation Between Shanghai Friendess and Do Fluoride

Can any of the company-specific risk be diversified away by investing in both Shanghai Friendess and Do Fluoride 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 Shanghai Friendess and Do Fluoride into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shanghai Friendess Electronics and Do Fluoride Chemicals Co, you can compare the effects of market volatilities on Shanghai Friendess and Do Fluoride 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 Shanghai Friendess with a short position of Do Fluoride. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Friendess and Do Fluoride.

Diversification Opportunities for Shanghai Friendess and Do Fluoride

-0.33

Correlation Coefficient

Shanghai Friendess  Do Fluoride

Very good diversification

The 3 months correlation between Shanghai and 002407 is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Friendess Electronics and Do Fluoride Chemicals Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Do Fluoride Chemicals and Shanghai Friendess 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 Shanghai Friendess Electronics are associated (or correlated) with Do Fluoride. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Do Fluoride Chemicals has no effect on the direction of Shanghai Friendess i.e., Shanghai Friendess and Do Fluoride go up and down completely randomly.

Pair Corralation between Shanghai Friendess and Do Fluoride

Assuming the 90 days trading horizon Shanghai Friendess Electronics is expected to generate 1.74 times more return on investment than Do Fluoride. However, Shanghai Friendess is 1.74 times more volatile than Do Fluoride Chemicals Co. It trades about 0.01 of its potential returns per unit of risk. Do Fluoride Chemicals Co is currently generating about -0.01 per unit of risk. If you would invest  18,348  in Shanghai Friendess Electronics on December 26, 2024 and sell it today you would lose (77.00) from holding Shanghai Friendess Electronics or give up 0.42% of portfolio value over 90 days.

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

Shanghai Friendess Electronics  vs.  Do Fluoride Chemicals Co

Shanghai Friendess

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Friendess Electronics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shanghai Friendess is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Do Fluoride Chemicals

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Shanghai Friendess and Do Fluoride

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

The idea behind Shanghai Friendess Electronics and Do Fluoride Chemicals 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.