Correlation Between CHONG QING and FUJIAN AONONG

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Can any of the company-specific risk be diversified away by investing in both CHONG QING and FUJIAN AONONG 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 CHONG QING and FUJIAN AONONG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHONG QING CHANGAN and FUJIAN AONONG BIOLOGICAL, you can compare the effects of market volatilities on CHONG QING and FUJIAN AONONG 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 CHONG QING with a short position of FUJIAN AONONG. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHONG QING and FUJIAN AONONG.

Diversification Opportunities for CHONG QING and FUJIAN AONONG

0.45
  Correlation Coefficient

Very weak diversification

The 3 months correlation between CHONG and FUJIAN is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding CHONG QING CHANGAN and FUJIAN AONONG BIOLOGICAL TECHN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FUJIAN AONONG BIOLOG and CHONG QING 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 CHONG QING CHANGAN are associated (or correlated) with FUJIAN AONONG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FUJIAN AONONG BIOLOG has no effect on the direction of CHONG QING i.e., CHONG QING and FUJIAN AONONG go up and down completely randomly.

Pair Corralation between CHONG QING and FUJIAN AONONG

Assuming the 90 days trading horizon CHONG QING is expected to generate 3.45 times less return on investment than FUJIAN AONONG. But when comparing it to its historical volatility, CHONG QING CHANGAN is 1.17 times less risky than FUJIAN AONONG. It trades about 0.04 of its potential returns per unit of risk. FUJIAN AONONG BIOLOGICAL is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  876.00  in FUJIAN AONONG BIOLOGICAL on May 14, 2022 and sell it today you would earn a total of  1,022  from holding FUJIAN AONONG BIOLOGICAL or generate 116.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

CHONG QING CHANGAN  vs.  FUJIAN AONONG BIOLOGICAL TECHN

 Performance (%) 
       Timeline  
CHONG QING CHANGAN 
CHONG Performance
16 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in CHONG QING CHANGAN are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CHONG QING sustained solid returns over the last few months and may actually be approaching a breakup point.

CHONG Price Channel

FUJIAN AONONG BIOLOG 
FUJIAN Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in FUJIAN AONONG BIOLOGICAL are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, FUJIAN AONONG sustained solid returns over the last few months and may actually be approaching a breakup point.

FUJIAN Price Channel

CHONG QING and FUJIAN AONONG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CHONG QING and FUJIAN AONONG

The main advantage of trading using opposite CHONG QING and FUJIAN AONONG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHONG QING position performs unexpectedly, FUJIAN AONONG 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 AONONG will offset losses from the drop in FUJIAN AONONG's long position.
The idea behind CHONG QING CHANGAN and FUJIAN AONONG BIOLOGICAL 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.

FUJIAN AONONG BIOLOGICAL

Pair trading matchups for FUJIAN AONONG

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The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against FUJIAN AONONG as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. FUJIAN AONONG's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, FUJIAN AONONG's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to FUJIAN AONONG BIOLOGICAL.
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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