Correlation Between Grape King and Fusheng Precision

Can any of the company-specific risk be diversified away by investing in both Grape King and Fusheng Precision 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 Grape King and Fusheng Precision into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Grape King Bio and Fusheng Precision Co, you can compare the effects of market volatilities on Grape King and Fusheng Precision 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 Grape King with a short position of Fusheng Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grape King and Fusheng Precision.

Diversification Opportunities for Grape King and Fusheng Precision

0.35

Correlation Coefficient

Grape King  Fusheng Precision

Weak diversification

The 3 months correlation between Grape and Fusheng is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Grape King Bio and Fusheng Precision Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fusheng Precision and Grape King 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 Grape King Bio are associated (or correlated) with Fusheng Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fusheng Precision has no effect on the direction of Grape King i.e., Grape King and Fusheng Precision go up and down completely randomly.

Pair Corralation between Grape King and Fusheng Precision

Assuming the 90 days trading horizon Grape King is expected to generate 13.78 times less return on investment than Fusheng Precision. But when comparing it to its historical volatility, Grape King Bio is 1.98 times less risky than Fusheng Precision. It trades about 0.01 of its potential returns per unit of risk. Fusheng Precision Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  20,700  in Fusheng Precision Co on September 4, 2024 and sell it today you would earn a total of  11,100  from holding Fusheng Precision Co or generate 53.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Grape King Bio  vs.  Fusheng Precision Co

Grape King Bio

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grape King Bio are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Grape King may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fusheng Precision

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fusheng Precision Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Fusheng Precision showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grape King and Fusheng Precision

The main advantage of trading using opposite Grape King and Fusheng Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grape King position performs unexpectedly, Fusheng Precision 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 Fusheng Precision will offset losses from the drop in Fusheng Precision's long position.

The idea behind Grape King Bio and Fusheng Precision Co 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.