Correlation Between Tandem Diabetes and Fanhua

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

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

Diversification Opportunities for Tandem Diabetes and Fanhua

0.48

Correlation Coefficient

Tandem Diabetes  Fanhua

Very weak diversification

The 3 months correlation between Tandem and Fanhua is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Tandem Diabetes Care and Fanhua Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fanhua Inc and Tandem Diabetes 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 Tandem Diabetes Care 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 Tandem Diabetes i.e., Tandem Diabetes and Fanhua go up and down completely randomly.

Pair Corralation between Tandem Diabetes and Fanhua

Given the investment horizon of 90 days Tandem Diabetes Care is expected to generate 0.94 times more return on investment than Fanhua. However, Tandem Diabetes Care is 1.07 times less risky than Fanhua. It trades about 0.26 of its potential returns per unit of risk. Fanhua Inc is currently generating about -0.32 per unit of risk. If you would invest  3,210  in Tandem Diabetes Care on October 8, 2024 and sell it today you would earn a total of  473.00  from holding Tandem Diabetes Care or generate 14.74% return on investment over 90 days.

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

Tandem Diabetes Care  vs.  Fanhua Inc

Tandem Diabetes Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tandem Diabetes Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Tandem Diabetes is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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 weak 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 Tandem Diabetes and Fanhua

The main advantage of trading using opposite Tandem Diabetes and Fanhua positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tandem Diabetes 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 Tandem Diabetes Care 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.