Correlation Between Goodwill E and Sichuan Fulin

Can any of the company-specific risk be diversified away by investing in both Goodwill E and Sichuan Fulin 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 Goodwill E and Sichuan Fulin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Goodwill E Health and Sichuan Fulin Transportation, you can compare the effects of market volatilities on Goodwill E and Sichuan Fulin 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 Goodwill E with a short position of Sichuan Fulin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodwill E and Sichuan Fulin.

Diversification Opportunities for Goodwill E and Sichuan Fulin

0.47

Correlation Coefficient

Goodwill E  Sichuan Fulin

Very weak diversification

The 3 months correlation between Goodwill and Sichuan is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Goodwill E Health and Sichuan Fulin Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Fulin Transp and Goodwill E 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 Goodwill E Health are associated (or correlated) with Sichuan Fulin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Fulin Transp has no effect on the direction of Goodwill E i.e., Goodwill E and Sichuan Fulin go up and down completely randomly.

Pair Corralation between Goodwill E and Sichuan Fulin

Assuming the 90 days trading horizon Goodwill E Health is expected to under-perform the Sichuan Fulin. But the stock apears to be less risky and, when comparing its historical volatility, Goodwill E Health is 1.21 times less risky than Sichuan Fulin. The stock trades about -0.64 of its potential returns per unit of risk. The Sichuan Fulin Transportation is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest  749.00  in Sichuan Fulin Transportation on October 8, 2024 and sell it today you would lose (90.00) from holding Sichuan Fulin Transportation or give up 12.02% of portfolio value over 90 days.

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

Goodwill E Health  vs.  Sichuan Fulin Transportation

Goodwill E Health

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sichuan Fulin Transp

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Goodwill E and Sichuan Fulin

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

The idea behind Goodwill E Health and Sichuan Fulin Transportation 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.