Correlation Between Fujian Longzhou and Beijing Wandong
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By analyzing existing cross correlation between Fujian Longzhou Transportation and Beijing Wandong Medical, you can compare the effects of market volatilities on Fujian Longzhou and Beijing Wandong 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 Fujian Longzhou with a short position of Beijing Wandong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fujian Longzhou and Beijing Wandong.
Diversification Opportunities for Fujian Longzhou and Beijing Wandong
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fujian and Beijing is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Fujian Longzhou Transportation and Beijing Wandong Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Wandong Medical and Fujian Longzhou 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 Fujian Longzhou Transportation are associated (or correlated) with Beijing Wandong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Wandong Medical has no effect on the direction of Fujian Longzhou i.e., Fujian Longzhou and Beijing Wandong go up and down completely randomly.
Pair Corralation between Fujian Longzhou and Beijing Wandong
Assuming the 90 days trading horizon Fujian Longzhou is expected to generate 3.64 times less return on investment than Beijing Wandong. In addition to that, Fujian Longzhou is 1.29 times more volatile than Beijing Wandong Medical. It trades about 0.09 of its total potential returns per unit of risk. Beijing Wandong Medical is currently generating about 0.42 per unit of volatility. If you would invest 1,417 in Beijing Wandong Medical on November 10, 2024 and sell it today you would earn a total of 208.00 from holding Beijing Wandong Medical or generate 14.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fujian Longzhou Transportation vs. Beijing Wandong Medical
Performance |
| Timeline |
| Fujian Longzhou Tran |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
| Beijing Wandong Medical |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
Fujian Longzhou and Beijing Wandong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fujian Longzhou and Beijing Wandong
The main advantage of trading using opposite Fujian Longzhou and Beijing Wandong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fujian Longzhou position performs unexpectedly, Beijing Wandong 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 Beijing Wandong will offset losses from the drop in Beijing Wandong's long position.The idea behind Fujian Longzhou Transportation and Beijing Wandong Medical 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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