Correlation Between Douglas Emmett and Fanhua

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

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

Diversification Opportunities for Douglas Emmett and Fanhua

-0.31

Correlation Coefficient

Douglas Emmett  Fanhua

Very good diversification

The 3 months correlation between Douglas and Fanhua is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Douglas Emmett and Fanhua Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fanhua Inc and Douglas Emmett 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 Douglas Emmett are associated (or correlated) with Fanhua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fanhua Inc has no effect on the direction of Douglas Emmett i.e., Douglas Emmett and Fanhua go up and down completely randomly.

Pair Corralation between Douglas Emmett and Fanhua

Considering the 90-day investment horizon Douglas Emmett is expected to generate 0.6 times more return on investment than Fanhua. However, Douglas Emmett is 1.67 times less risky than Fanhua. It trades about 0.03 of its potential returns per unit of risk. Fanhua Inc is currently generating about -0.08 per unit of risk. If you would invest  1,378  in Douglas Emmett on October 11, 2024 and sell it today you would earn a total of  312.00  from holding Douglas Emmett or generate 22.64% return on investment over 90 days.

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

Douglas Emmett  vs.  Fanhua Inc

Douglas Emmett

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Douglas Emmett has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Douglas Emmett is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Fanhua Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fanhua Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Douglas Emmett and Fanhua

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

The idea behind Douglas Emmett and Fanhua Inc 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.