Correlation Between Fanuc and Weichai Power
Can any of the company-specific risk be diversified away by investing in both Fanuc and Weichai Power 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 Fanuc and Weichai Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fanuc and Weichai Power, you can compare the effects of market volatilities on Fanuc and Weichai Power 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 Fanuc with a short position of Weichai Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fanuc and Weichai Power.
Diversification Opportunities for Fanuc and Weichai Power
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fanuc and Weichai is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Fanuc and Weichai Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weichai Power and Fanuc 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 Fanuc are associated (or correlated) with Weichai Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weichai Power has no effect on the direction of Fanuc i.e., Fanuc and Weichai Power go up and down completely randomly.
Pair Corralation between Fanuc and Weichai Power
Assuming the 90 days horizon Fanuc is expected to under-perform the Weichai Power. But the pink sheet apears to be less risky and, when comparing its historical volatility, Fanuc is 1.52 times less risky than Weichai Power. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Weichai Power is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1,200 in Weichai Power on September 1, 2024 and sell it today you would lose (74.00) from holding Weichai Power or give up 6.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 23.74% |
| Values | Daily Returns |
Fanuc vs. Weichai Power
Performance |
| Timeline |
| Fanuc |
| Weichai Power |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Fanuc and Weichai Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fanuc and Weichai Power
The main advantage of trading using opposite Fanuc and Weichai Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fanuc position performs unexpectedly, Weichai Power 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 Weichai Power will offset losses from the drop in Weichai Power's long position.The idea behind Fanuc and Weichai Power 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.| Weichai Power vs. Shanghai Electric Group | Weichai Power vs. Xinjiang Goldwind Science | Weichai Power vs. Nordson | Weichai Power vs. CVD Equipment |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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