Correlation Between Giant Manufacturing and Farglory Land

Can any of the company-specific risk be diversified away by investing in both Giant Manufacturing and Farglory Land 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 Giant Manufacturing and Farglory Land into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Giant Manufacturing Co and Farglory Land Development, you can compare the effects of market volatilities on Giant Manufacturing and Farglory Land 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 Giant Manufacturing with a short position of Farglory Land. Check out your portfolio center. Please also check ongoing floating volatility patterns of Giant Manufacturing and Farglory Land.

Diversification Opportunities for Giant Manufacturing and Farglory Land

0.29

Correlation Coefficient

Giant Manufacturing  Farglory Land

Modest diversification

The 3 months correlation between Giant and Farglory is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Giant Manufacturing Co and Farglory Land Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farglory Land Development and Giant Manufacturing 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 Giant Manufacturing Co are associated (or correlated) with Farglory Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farglory Land Development has no effect on the direction of Giant Manufacturing i.e., Giant Manufacturing and Farglory Land go up and down completely randomly.

Pair Corralation between Giant Manufacturing and Farglory Land

Assuming the 90 days trading horizon Giant Manufacturing is expected to generate 2.39 times less return on investment than Farglory Land. But when comparing it to its historical volatility, Giant Manufacturing Co is 1.36 times less risky than Farglory Land. It trades about 0.06 of its potential returns per unit of risk. Farglory Land Development is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  6,850  in Farglory Land Development on December 2, 2024 and sell it today you would earn a total of  950.00  from holding Farglory Land Development or generate 13.87% return on investment over 90 days.

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

Giant Manufacturing Co  vs.  Farglory Land Development

Giant Manufacturing

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Giant Manufacturing Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Giant Manufacturing may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Farglory Land Development

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Farglory Land Development are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Farglory Land showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Giant Manufacturing and Farglory Land

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

The idea behind Giant Manufacturing Co and Farglory Land Development 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.