Correlation Between Fanhua and Huize Holding

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

By analyzing existing cross correlation between Fanhua Inc and Huize Holding, you can compare the effects of market volatilities on Fanhua and Huize Holding 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 Fanhua with a short position of Huize Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fanhua and Huize Holding.

Diversification Opportunities for Fanhua and Huize Holding

0.02

Correlation Coefficient

Fanhua  Huize Holding

Significant diversification

The 3 months correlation between Fanhua and Huize is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Fanhua Inc and Huize Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huize Holding and Fanhua 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 Fanhua Inc are associated (or correlated) with Huize Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huize Holding has no effect on the direction of Fanhua i.e., Fanhua and Huize Holding go up and down completely randomly.

Pair Corralation between Fanhua and Huize Holding

Given the investment horizon of 90 days Fanhua Inc is expected to under-perform the Huize Holding. But the stock apears to be less risky and, when comparing its historical volatility, Fanhua Inc is 17.0 times less risky than Huize Holding. The stock trades about -0.09 of its potential returns per unit of risk. The Huize Holding is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  101.00  in Huize Holding on September 12, 2024 and sell it today you would earn a total of  308.00  from holding Huize Holding or generate 304.95% return on investment over 90 days.

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

Fanhua Inc  vs.  Huize Holding

Fanhua Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fanhua Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Fanhua unveiled solid returns over the last few months and may actually be approaching a breakup point.

Huize Holding

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Huize Holding are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting forward indicators, Huize Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fanhua and Huize Holding

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

The idea behind Fanhua Inc and Huize Holding 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.