Correlation Between Fujian Wanchen and Guangdong Liantai

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

Diversification Opportunities for Fujian Wanchen and Guangdong Liantai

FujianGuangdongDiversified AwayFujianGuangdongDiversified Away100%
-0.37
  Correlation Coefficient

Very good diversification

The 3 months correlation between Fujian and Guangdong is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Fujian Wanchen Biotechnology and Guangdong Liantai Environmenta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Liantai and Fujian Wanchen 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 Wanchen Biotechnology are associated (or correlated) with Guangdong Liantai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Liantai has no effect on the direction of Fujian Wanchen i.e., Fujian Wanchen and Guangdong Liantai go up and down completely randomly.

Pair Corralation between Fujian Wanchen and Guangdong Liantai

Assuming the 90 days trading horizon Fujian Wanchen Biotechnology is expected to under-perform the Guangdong Liantai. In addition to that, Fujian Wanchen is 1.52 times more volatile than Guangdong Liantai Environmental. It trades about -0.24 of its total potential returns per unit of risk. Guangdong Liantai Environmental is currently generating about 0.09 per unit of volatility. If you would invest  391.00  in Guangdong Liantai Environmental on November 25, 2024 and sell it today you would earn a total of  6.00  from holding Guangdong Liantai Environmental or generate 1.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Fujian Wanchen Biotechnology  vs.  Guangdong Liantai Environmenta

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10010203040
JavaScript chart by amCharts 3.21.15300972 603797
       Timeline  
Fujian Wanchen Biote 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Wanchen Biotechnology are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fujian Wanchen sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb708090100
Guangdong Liantai 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Guangdong Liantai Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Guangdong Liantai is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb3.73.83.944.14.24.34.44.5

Fujian Wanchen and Guangdong Liantai Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-11.81-8.84-5.88-2.910.03.096.239.3712.51 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15300972 603797
       Returns  

Pair Trading with Fujian Wanchen and Guangdong Liantai

The main advantage of trading using opposite Fujian Wanchen and Guangdong Liantai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fujian Wanchen position performs unexpectedly, Guangdong Liantai 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 Guangdong Liantai will offset losses from the drop in Guangdong Liantai's long position.
The idea behind Fujian Wanchen Biotechnology and Guangdong Liantai Environmental 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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