Correlation Between FUYO GENERAL and China Merchants

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

By analyzing existing cross correlation between FUYO GENERAL LEASE and China Merchants Port, you can compare the effects of market volatilities on FUYO GENERAL and China Merchants 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 FUYO GENERAL with a short position of China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of FUYO GENERAL and China Merchants.

Diversification Opportunities for FUYO GENERAL and China Merchants

-0.23

Correlation Coefficient

FUYO GENERAL  China Merchants

Very good diversification

The 3 months correlation between FUYO and China is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding FUYO GENERAL LEASE and China Merchants Port in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Merchants Port and FUYO GENERAL 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 FUYO GENERAL LEASE are associated (or correlated) with China Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Merchants Port has no effect on the direction of FUYO GENERAL i.e., FUYO GENERAL and China Merchants go up and down completely randomly.

Pair Corralation between FUYO GENERAL and China Merchants

Assuming the 90 days horizon FUYO GENERAL is expected to generate 1.01 times less return on investment than China Merchants. But when comparing it to its historical volatility, FUYO GENERAL LEASE is 2.25 times less risky than China Merchants. It trades about 0.21 of its potential returns per unit of risk. China Merchants Port is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  153.00  in China Merchants Port on October 10, 2024 and sell it today you would earn a total of  5.00  from holding China Merchants Port or generate 3.27% return on investment over 90 days.

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

FUYO GENERAL LEASE  vs.  China Merchants Port

FUYO GENERAL LEASE

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FUYO GENERAL LEASE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FUYO GENERAL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

China Merchants Port

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Merchants Port are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, China Merchants is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with FUYO GENERAL and China Merchants

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

The idea behind FUYO GENERAL LEASE and China Merchants Port 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.