Correlation Between Nongfu Spring and Fernhill Beverage

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

By analyzing existing cross correlation between Nongfu Spring Co and Fernhill Beverage, you can compare the effects of market volatilities on Nongfu Spring and Fernhill Beverage 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 Nongfu Spring with a short position of Fernhill Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nongfu Spring and Fernhill Beverage.

Diversification Opportunities for Nongfu Spring and Fernhill Beverage

0.0

Correlation Coefficient

Nongfu Spring  Fernhill Beverage

Pay attention - limited upside

The 3 months correlation between Nongfu and Fernhill is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Nongfu Spring Co and Fernhill Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fernhill Beverage and Nongfu Spring 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 Nongfu Spring Co are associated (or correlated) with Fernhill Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fernhill Beverage has no effect on the direction of Nongfu Spring i.e., Nongfu Spring and Fernhill Beverage go up and down completely randomly.

Pair Corralation between Nongfu Spring and Fernhill Beverage

If you would invest  340.00  in Nongfu Spring Co on September 23, 2024 and sell it today you would earn a total of  102.00  from holding Nongfu Spring Co or generate 30.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

Nongfu Spring Co  vs.  Fernhill Beverage

Nongfu Spring

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nongfu Spring Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Nongfu Spring reported solid returns over the last few months and may actually be approaching a breakup point.

Fernhill Beverage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fernhill Beverage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Fernhill Beverage is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nongfu Spring and Fernhill Beverage

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

The idea behind Nongfu Spring Co and Fernhill Beverage 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.