Correlation Between Ruentex Development and Foxconn Technology

Can any of the company-specific risk be diversified away by investing in both Ruentex Development and Foxconn Technology 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 Ruentex Development and Foxconn Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Ruentex Development and Foxconn Technology

-0.11

Correlation Coefficient

Ruentex Development  Foxconn Technology

Good diversification

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

Pair Corralation between Ruentex Development and Foxconn Technology

Assuming the 90 days trading horizon Ruentex Development is expected to generate 2.5 times less return on investment than Foxconn Technology. But when comparing it to its historical volatility, Ruentex Development Co is 1.37 times less risky than Foxconn Technology. It trades about 0.04 of its potential returns per unit of risk. Foxconn Technology Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5,120  in Foxconn Technology Co on October 6, 2024 and sell it today you would earn a total of  2,450  from holding Foxconn Technology Co or generate 47.85% return on investment over 90 days.

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

Ruentex Development Co  vs.  Foxconn Technology Co

Ruentex Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ruentex Development Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Foxconn Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Foxconn Technology Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Foxconn Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ruentex Development and Foxconn Technology

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

The idea behind Ruentex Development Co and Foxconn Technology 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.