Correlation Between Shanghai Fudan and JuneYao Dairy

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

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

Diversification Opportunities for Shanghai Fudan and JuneYao Dairy

0.49

Correlation Coefficient

Shanghai Fudan  JuneYao Dairy

Very weak diversification

The 3 months correlation between Shanghai and JuneYao is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Fudan Microelectronic and JuneYao Dairy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JuneYao Dairy and Shanghai Fudan 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 Fudan Microelectronics are associated (or correlated) with JuneYao Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JuneYao Dairy has no effect on the direction of Shanghai Fudan i.e., Shanghai Fudan and JuneYao Dairy go up and down completely randomly.

Pair Corralation between Shanghai Fudan and JuneYao Dairy

Assuming the 90 days trading horizon Shanghai Fudan Microelectronics is expected to generate 1.39 times more return on investment than JuneYao Dairy. However, Shanghai Fudan is 1.39 times more volatile than JuneYao Dairy Co. It trades about 0.09 of its potential returns per unit of risk. JuneYao Dairy Co is currently generating about 0.07 per unit of risk. If you would invest  2,953  in Shanghai Fudan Microelectronics on September 23, 2024 and sell it today you would earn a total of  1,241  from holding Shanghai Fudan Microelectronics or generate 42.03% return on investment over 90 days.

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

Shanghai Fudan Microelectronic  vs.  JuneYao Dairy Co

Shanghai Fudan Micro

Risk-Adjusted Performance

15 of 100

Good

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

JuneYao Dairy

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JuneYao Dairy Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, JuneYao Dairy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shanghai Fudan and JuneYao Dairy

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

The idea behind Shanghai Fudan Microelectronics and JuneYao Dairy 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..