Correlation Between Blue Sail and Sichuan Fulin

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Can any of the company-specific risk be diversified away by investing in both Blue Sail and Sichuan Fulin 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 Blue Sail and Sichuan Fulin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blue Sail Medical and Sichuan Fulin Transportation, you can compare the effects of market volatilities on Blue Sail and Sichuan Fulin 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 Blue Sail with a short position of Sichuan Fulin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Sail and Sichuan Fulin.

Diversification Opportunities for Blue Sail and Sichuan Fulin

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Blue and Sichuan is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Blue Sail Medical and Sichuan Fulin Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Fulin Transp and Blue Sail 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 Blue Sail Medical are associated (or correlated) with Sichuan Fulin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Fulin Transp has no effect on the direction of Blue Sail i.e., Blue Sail and Sichuan Fulin go up and down completely randomly.

Pair Corralation between Blue Sail and Sichuan Fulin

Assuming the 90 days trading horizon Blue Sail is expected to generate 4.32 times less return on investment than Sichuan Fulin. But when comparing it to its historical volatility, Blue Sail Medical is 1.2 times less risky than Sichuan Fulin. It trades about 0.09 of its potential returns per unit of risk. Sichuan Fulin Transportation is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  657.00  in Sichuan Fulin Transportation on September 12, 2024 and sell it today you would earn a total of  121.00  from holding Sichuan Fulin Transportation or generate 18.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Blue Sail Medical  vs.  Sichuan Fulin Transportation

 Performance 
       Timeline  
Blue Sail Medical 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Blue Sail Medical are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Blue Sail sustained solid returns over the last few months and may actually be approaching a breakup point.
Sichuan Fulin Transp 

Risk-Adjusted Performance

22 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Fulin Transportation are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Fulin sustained solid returns over the last few months and may actually be approaching a breakup point.

Blue Sail and Sichuan Fulin Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Blue Sail and Sichuan Fulin

The main advantage of trading using opposite Blue Sail and Sichuan Fulin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Sail position performs unexpectedly, Sichuan Fulin 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 Sichuan Fulin will offset losses from the drop in Sichuan Fulin's long position.
The idea behind Blue Sail Medical and Sichuan Fulin Transportation 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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