Correlation Between Magnite and Fangdd Network

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

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

Diversification Opportunities for Magnite and Fangdd Network

-0.22

Correlation Coefficient

Magnite  Fangdd Network

Very good diversification

The 3 months correlation between Magnite and Fangdd is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Magnite and Fangdd Network Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fangdd Network Group and Magnite 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 Magnite are associated (or correlated) with Fangdd Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fangdd Network Group has no effect on the direction of Magnite i.e., Magnite and Fangdd Network go up and down completely randomly.

Pair Corralation between Magnite and Fangdd Network

Given the investment horizon of 90 days Magnite is expected to generate 2.8 times less return on investment than Fangdd Network. But when comparing it to its historical volatility, Magnite is 2.74 times less risky than Fangdd Network. It trades about 0.03 of its potential returns per unit of risk. Fangdd Network Group is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  58.00  in Fangdd Network Group on November 28, 2024 and sell it today you would lose (1.00) from holding Fangdd Network Group or give up 1.72% of portfolio value over 90 days.

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

Magnite  vs.  Fangdd Network Group

Magnite

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Magnite are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Magnite may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Fangdd Network Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fangdd Network Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Fangdd Network displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magnite and Fangdd Network

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

The idea behind Magnite and Fangdd Network Group 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.