Correlation Between China Resources and Fukuyama Transporting

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

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

Diversification Opportunities for China Resources and Fukuyama Transporting

0.11

Correlation Coefficient

China Resources  Fukuyama Transporting

Average diversification

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

Pair Corralation between China Resources and Fukuyama Transporting

Assuming the 90 days horizon China Resources is expected to generate 1.66 times less return on investment than Fukuyama Transporting. In addition to that, China Resources is 1.33 times more volatile than Fukuyama Transporting Co. It trades about 0.03 of its total potential returns per unit of risk. Fukuyama Transporting Co is currently generating about 0.06 per unit of volatility. If you would invest  2,180  in Fukuyama Transporting Co on September 24, 2024 and sell it today you would earn a total of  40.00  from holding Fukuyama Transporting Co or generate 1.83% return on investment over 90 days.

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

China Resources Land  vs.  Fukuyama Transporting Co

China Resources Land

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Land are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fukuyama Transporting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fukuyama Transporting Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Fukuyama Transporting is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with China Resources and Fukuyama Transporting

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

The idea behind China Resources Land and Fukuyama Transporting 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.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.