Correlation Between Ping An and Fujian Longzhou

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

By analyzing existing cross correlation between Ping An Insurance and Fujian Longzhou Transportation, you can compare the effects of market volatilities on Ping An and Fujian Longzhou 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 Ping An with a short position of Fujian Longzhou. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and Fujian Longzhou.

Diversification Opportunities for Ping An and Fujian Longzhou

0.73

Correlation Coefficient

Ping An  Fujian Longzhou

Poor diversification

The 3 months correlation between Ping and Fujian is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and Fujian Longzhou Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Longzhou Tran and Ping An 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 Ping An Insurance are associated (or correlated) with Fujian Longzhou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Longzhou Tran has no effect on the direction of Ping An i.e., Ping An and Fujian Longzhou go up and down completely randomly.

Pair Corralation between Ping An and Fujian Longzhou

Assuming the 90 days trading horizon Ping An Insurance is expected to generate 0.44 times more return on investment than Fujian Longzhou. However, Ping An Insurance is 2.25 times less risky than Fujian Longzhou. It trades about 0.08 of its potential returns per unit of risk. Fujian Longzhou Transportation is currently generating about 0.03 per unit of risk. If you would invest  3,960  in Ping An Insurance on September 4, 2024 and sell it today you would earn a total of  1,483  from holding Ping An Insurance or generate 37.45% return on investment over 90 days.

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

Ping An Insurance  vs.  Fujian Longzhou Transportation

Ping An Insurance

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ping An Insurance are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ping An sustained solid returns over the last few months and may actually be approaching a breakup point.

Fujian Longzhou Tran

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Longzhou Transportation are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fujian Longzhou sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ping An and Fujian Longzhou

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

The idea behind Ping An Insurance and Fujian Longzhou Transportation 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.