Correlation Between China Feihe and First Pacific
Can any of the company-specific risk be diversified away by investing in both China Feihe and First Pacific 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 China Feihe and First Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Feihe Limited and First Pacific, you can compare the effects of market volatilities on China Feihe and First Pacific 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 China Feihe with a short position of First Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Feihe and First Pacific.
Diversification Opportunities for China Feihe and First Pacific
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and First is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding China Feihe Limited and First Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Pacific and China Feihe 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 China Feihe Limited are associated (or correlated) with First Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Pacific has no effect on the direction of China Feihe i.e., China Feihe and First Pacific go up and down completely randomly.
Pair Corralation between China Feihe and First Pacific
Assuming the 90 days horizon China Feihe Limited is expected to generate 0.93 times more return on investment than First Pacific. However, China Feihe Limited is 1.07 times less risky than First Pacific. It trades about 0.07 of its potential returns per unit of risk. First Pacific is currently generating about 0.06 per unit of risk. If you would invest 18.00 in China Feihe Limited on August 31, 2024 and sell it today you would earn a total of 52.00 from holding China Feihe Limited or generate 288.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.56% |
| Values | Daily Returns |
China Feihe Limited vs. First Pacific
Performance |
| Timeline |
| China Feihe Limited |
| First Pacific |
China Feihe and First Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Feihe and First Pacific
The main advantage of trading using opposite China Feihe and First Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Feihe position performs unexpectedly, First Pacific 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 First Pacific will offset losses from the drop in First Pacific's long position.| China Feihe vs. The A2 Milk | China Feihe vs. Altavoz Entertainment | China Feihe vs. Artisan Consumer Goods | China Feihe vs. Avi Ltd ADR |
| First Pacific vs. The A2 Milk | First Pacific vs. Altavoz Entertainment | First Pacific vs. Artisan Consumer Goods | First Pacific vs. Avi Ltd ADR |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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