Correlation Between Shanghai CEO and Fujian Newland

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

By analyzing existing cross correlation between Shanghai CEO Environmental and Fujian Newland Computer, you can compare the effects of market volatilities on Shanghai CEO and Fujian Newland 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 CEO with a short position of Fujian Newland. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai CEO and Fujian Newland.

Diversification Opportunities for Shanghai CEO and Fujian Newland

0.95

Correlation Coefficient

Shanghai CEO  Fujian Newland

Almost no diversification

The 3 months correlation between Shanghai and Fujian is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai CEO Environmental and Fujian Newland Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Newland Computer and Shanghai CEO 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 CEO Environmental are associated (or correlated) with Fujian Newland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Newland Computer has no effect on the direction of Shanghai CEO i.e., Shanghai CEO and Fujian Newland go up and down completely randomly.

Pair Corralation between Shanghai CEO and Fujian Newland

Assuming the 90 days trading horizon Shanghai CEO is expected to generate 1.71 times less return on investment than Fujian Newland. But when comparing it to its historical volatility, Shanghai CEO Environmental is 1.28 times less risky than Fujian Newland. It trades about 0.19 of its potential returns per unit of risk. Fujian Newland Computer is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  1,200  in Fujian Newland Computer on September 15, 2024 and sell it today you would earn a total of  900.00  from holding Fujian Newland Computer or generate 75.0% return on investment over 90 days.

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

Shanghai CEO Environmental  vs.  Fujian Newland Computer

Shanghai CEO Environ

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai CEO Environmental are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai CEO sustained solid returns over the last few months and may actually be approaching a breakup point.

Fujian Newland Computer

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Newland Computer are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fujian Newland sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shanghai CEO and Fujian Newland

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

The idea behind Shanghai CEO Environmental and Fujian Newland Computer 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.