Correlation Between Shining Building and Farglory Land

Can any of the company-specific risk be diversified away by investing in both Shining Building and Farglory Land 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 Shining Building and Farglory Land into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shining Building Business and Farglory Land Development, you can compare the effects of market volatilities on Shining Building and Farglory Land 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 Shining Building with a short position of Farglory Land. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shining Building and Farglory Land.

Diversification Opportunities for Shining Building and Farglory Land

-0.51

Correlation Coefficient

Shining Building  Farglory Land

Excellent diversification

The 3 months correlation between Shining and Farglory is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Shining Building Business and Farglory Land Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farglory Land Development and Shining Building 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 Shining Building Business are associated (or correlated) with Farglory Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farglory Land Development has no effect on the direction of Shining Building i.e., Shining Building and Farglory Land go up and down completely randomly.

Pair Corralation between Shining Building and Farglory Land

Assuming the 90 days trading horizon Shining Building Business is expected to generate 0.87 times more return on investment than Farglory Land. However, Shining Building Business is 1.16 times less risky than Farglory Land. It trades about 0.09 of its potential returns per unit of risk. Farglory Land Development is currently generating about -0.11 per unit of risk. If you would invest  1,025  in Shining Building Business on September 3, 2024 and sell it today you would earn a total of  110.00  from holding Shining Building Business or generate 10.73% return on investment over 90 days.

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

Shining Building Business  vs.  Farglory Land Development

Shining Building Business

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shining Building Business are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Shining Building may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Farglory Land Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Farglory Land Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Shining Building and Farglory Land

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

The idea behind Shining Building Business and Farglory Land Development 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.