Correlation Between Baldwin Insurance and Fanhua

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

By analyzing existing cross correlation between The Baldwin Insurance and Fanhua Inc, you can compare the effects of market volatilities on Baldwin Insurance and Fanhua 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 Baldwin Insurance with a short position of Fanhua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baldwin Insurance and Fanhua.

Diversification Opportunities for Baldwin Insurance and Fanhua

0.63

Correlation Coefficient

Baldwin Insurance  Fanhua

Poor diversification

The 3 months correlation between Baldwin and Fanhua is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding The Baldwin Insurance and Fanhua Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fanhua Inc and Baldwin Insurance 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 The Baldwin Insurance are associated (or correlated) with Fanhua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fanhua Inc has no effect on the direction of Baldwin Insurance i.e., Baldwin Insurance and Fanhua go up and down completely randomly.

Pair Corralation between Baldwin Insurance and Fanhua

Given the investment horizon of 90 days The Baldwin Insurance is expected to under-perform the Fanhua. But the stock apears to be less risky and, when comparing its historical volatility, The Baldwin Insurance is 1.84 times less risky than Fanhua. The stock trades about -0.08 of its potential returns per unit of risk. The Fanhua Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  108.00  in Fanhua Inc on September 21, 2024 and sell it today you would earn a total of  0.00  from holding Fanhua Inc or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

The Baldwin Insurance  vs.  Fanhua Inc

Baldwin Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Baldwin Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Fanhua Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fanhua Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Fanhua may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Baldwin Insurance and Fanhua

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

The idea behind The Baldwin Insurance and Fanhua Inc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.