Correlation Between Shui Mu and Fulgent Sun

Can any of the company-specific risk be diversified away by investing in both Shui Mu and Fulgent Sun 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 Shui Mu and Fulgent Sun into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shui Mu International Co and Fulgent Sun International, you can compare the effects of market volatilities on Shui Mu and Fulgent Sun 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 Shui Mu with a short position of Fulgent Sun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shui Mu and Fulgent Sun.

Diversification Opportunities for Shui Mu and Fulgent Sun

0.11

Correlation Coefficient

Shui Mu  Fulgent Sun

Average diversification

The 3 months correlation between Shui and Fulgent is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Shui Mu International Co and Fulgent Sun International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fulgent Sun International and Shui Mu 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 Shui Mu International Co are associated (or correlated) with Fulgent Sun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fulgent Sun International has no effect on the direction of Shui Mu i.e., Shui Mu and Fulgent Sun go up and down completely randomly.

Pair Corralation between Shui Mu and Fulgent Sun

Assuming the 90 days trading horizon Shui Mu International Co is expected to under-perform the Fulgent Sun. But the stock apears to be less risky and, when comparing its historical volatility, Shui Mu International Co is 3.0 times less risky than Fulgent Sun. The stock trades about -0.04 of its potential returns per unit of risk. The Fulgent Sun International is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  11,650  in Fulgent Sun International on September 16, 2024 and sell it today you would earn a total of  600.00  from holding Fulgent Sun International or generate 5.15% return on investment over 90 days.

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

Shui Mu International Co  vs.  Fulgent Sun International

Shui Mu International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shui Mu International Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Shui Mu is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Fulgent Sun International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fulgent Sun International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Fulgent Sun may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Shui Mu and Fulgent Sun

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

The idea behind Shui Mu International Co and Fulgent Sun International 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.