Correlation Between Fangdd Network and Southcorp Capital

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

By analyzing existing cross correlation between Fangdd Network Group and Southcorp Capital, you can compare the effects of market volatilities on Fangdd Network and Southcorp Capital 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 Fangdd Network with a short position of Southcorp Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fangdd Network and Southcorp Capital.

Diversification Opportunities for Fangdd Network and Southcorp Capital

0.01

Correlation Coefficient

Fangdd Network  Southcorp Capital

Significant diversification

The 3 months correlation between Fangdd and Southcorp is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Fangdd Network Group and Southcorp Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southcorp Capital and Fangdd Network 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 Fangdd Network Group are associated (or correlated) with Southcorp Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southcorp Capital has no effect on the direction of Fangdd Network i.e., Fangdd Network and Southcorp Capital go up and down completely randomly.

Pair Corralation between Fangdd Network and Southcorp Capital

Considering the 90-day investment horizon Fangdd Network is expected to generate 774.08 times less return on investment than Southcorp Capital. But when comparing it to its historical volatility, Fangdd Network Group is 33.76 times less risky than Southcorp Capital. It trades about 0.01 of its potential returns per unit of risk. Southcorp Capital is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  0.30  in Southcorp Capital on December 4, 2024 and sell it today you would lose (0.29) from holding Southcorp Capital or give up 96.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Fangdd Network Group  vs.  Southcorp Capital

Fangdd Network Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fangdd Network Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very inconsistent basic indicators, Fangdd Network may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Southcorp Capital

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Southcorp Capital are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical indicators, Southcorp Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fangdd Network and Southcorp Capital

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

The idea behind Fangdd Network Group and Southcorp Capital 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.