Correlation Between Fanhua and CbdMD

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

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

Diversification Opportunities for Fanhua and CbdMD

-0.27

Correlation Coefficient

Fanhua  CbdMD

Very good diversification

The 3 months correlation between Fanhua and CbdMD is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Fanhua Inc and cbdMD Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on cbdMD Inc and Fanhua 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 Fanhua Inc are associated (or correlated) with CbdMD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of cbdMD Inc has no effect on the direction of Fanhua i.e., Fanhua and CbdMD go up and down completely randomly.

Pair Corralation between Fanhua and CbdMD

Given the investment horizon of 90 days Fanhua Inc is expected to generate 1.37 times more return on investment than CbdMD. However, Fanhua is 1.37 times more volatile than cbdMD Inc. It trades about -0.06 of its potential returns per unit of risk. cbdMD Inc is currently generating about -0.09 per unit of risk. If you would invest  350.00  in Fanhua Inc on February 21, 2024 and sell it today you would lose (17.00) from holding Fanhua Inc or give up 4.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	81.82%
Values	Daily Returns

Fanhua Inc  vs.  cbdMD Inc

Fanhua Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fanhua Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

cbdMD Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in cbdMD Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, CbdMD may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Fanhua and CbdMD

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

The idea behind Fanhua Inc and cbdMD 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.