Correlation Between Fanhua and VNET Group

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

By analyzing existing cross correlation between Fanhua Inc and VNET Group DRC, you can compare the effects of market volatilities on Fanhua and VNET Group 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 VNET Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fanhua and VNET Group.

Diversification Opportunities for Fanhua and VNET Group

-0.3

Correlation Coefficient

Fanhua  VNET Group

Very good diversification

The 3 months correlation between Fanhua and VNET is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Fanhua Inc and VNET Group DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VNET Group DRC 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 VNET Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VNET Group DRC has no effect on the direction of Fanhua i.e., Fanhua and VNET Group go up and down completely randomly.

Pair Corralation between Fanhua and VNET Group

Given the investment horizon of 90 days Fanhua is expected to generate 1.07 times less return on investment than VNET Group. In addition to that, Fanhua is 1.05 times more volatile than VNET Group DRC. It trades about 0.11 of its total potential returns per unit of risk. VNET Group DRC is currently generating about 0.12 per unit of volatility. If you would invest  271.00  in VNET Group DRC on August 31, 2024 and sell it today you would earn a total of  115.00  from holding VNET Group DRC or generate 42.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	60.32%
Values	Daily Returns

Fanhua Inc  vs.  VNET Group DRC

Fanhua Inc

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Fanhua Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly unsteady basic indicators, Fanhua demonstrated solid returns over the last few months and may actually be approaching a breakup point.

VNET Group DRC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VNET Group DRC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, VNET Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fanhua and VNET Group

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

The idea behind Fanhua Inc and VNET Group DRC 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.