Correlation Between Fujian Nanwang and Zhongshan Public

Can any of the company-specific risk be diversified away by investing in both Fujian Nanwang and Zhongshan Public 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 Nanwang and Zhongshan Public into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fujian Nanwang Environment and Zhongshan Public Utilities, you can compare the effects of market volatilities on Fujian Nanwang and Zhongshan Public 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 Nanwang with a short position of Zhongshan Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fujian Nanwang and Zhongshan Public.

Diversification Opportunities for Fujian Nanwang and Zhongshan Public

0.95

Correlation Coefficient

Fujian Nanwang  Zhongshan Public

Almost no diversification

The 3 months correlation between Fujian and Zhongshan is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Fujian Nanwang Environment and Zhongshan Public Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongshan Public Uti and Fujian Nanwang 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 Nanwang Environment are associated (or correlated) with Zhongshan Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongshan Public Uti has no effect on the direction of Fujian Nanwang i.e., Fujian Nanwang and Zhongshan Public go up and down completely randomly.

Pair Corralation between Fujian Nanwang and Zhongshan Public

Assuming the 90 days trading horizon Fujian Nanwang Environment is expected to generate 0.98 times more return on investment than Zhongshan Public. However, Fujian Nanwang Environment is 1.02 times less risky than Zhongshan Public. It trades about 0.18 of its potential returns per unit of risk. Zhongshan Public Utilities is currently generating about 0.13 per unit of risk. If you would invest  950.00  in Fujian Nanwang Environment on September 1, 2024 and sell it today you would earn a total of  292.00  from holding Fujian Nanwang Environment or generate 30.74% return on investment over 90 days.

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

Fujian Nanwang Environment  vs.  Zhongshan Public Utilities

Fujian Nanwang Envir

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Nanwang Environment are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fujian Nanwang sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhongshan Public Uti

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongshan Public Utilities are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongshan Public sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fujian Nanwang and Zhongshan Public

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

The idea behind Fujian Nanwang Environment and Zhongshan Public Utilities 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.