Correlation Between Full Truck and Preferred Commerce

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

By analyzing existing cross correlation between Full Truck Alliance and Preferred Commerce, you can compare the effects of market volatilities on Full Truck and Preferred Commerce 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 Full Truck with a short position of Preferred Commerce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Full Truck and Preferred Commerce.

Diversification Opportunities for Full Truck and Preferred Commerce

0.88

Correlation Coefficient

Full Truck  Preferred Commerce

Very poor diversification

The 3 months correlation between Full and Preferred is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Full Truck Alliance and Preferred Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preferred Commerce and Full Truck 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 Full Truck Alliance are associated (or correlated) with Preferred Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preferred Commerce has no effect on the direction of Full Truck i.e., Full Truck and Preferred Commerce go up and down completely randomly.

Pair Corralation between Full Truck and Preferred Commerce

Considering the 90-day investment horizon Full Truck is expected to generate 8.22 times less return on investment than Preferred Commerce. But when comparing it to its historical volatility, Full Truck Alliance is 3.81 times less risky than Preferred Commerce. It trades about 0.18 of its potential returns per unit of risk. Preferred Commerce is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  134.00  in Preferred Commerce on September 27, 2024 and sell it today you would earn a total of  214.00  from holding Preferred Commerce or generate 159.7% return on investment over 90 days.

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

Full Truck Alliance  vs.  Preferred Commerce

Full Truck Alliance

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Full Truck Alliance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, Full Truck displayed solid returns over the last few months and may actually be approaching a breakup point.

Preferred Commerce

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Preferred Commerce are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting essential indicators, Preferred Commerce showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Full Truck and Preferred Commerce

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

The idea behind Full Truck Alliance and Preferred Commerce 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.