Correlation Between Fanhua and Crawford

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

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

Diversification Opportunities for Fanhua and Crawford

0.55

Correlation Coefficient

Fanhua  Crawford

Very weak diversification

The 3 months correlation between Fanhua and Crawford is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Fanhua Inc and Crawford Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crawford 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 Crawford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crawford has no effect on the direction of Fanhua i.e., Fanhua and Crawford go up and down completely randomly.

Pair Corralation between Fanhua and Crawford

Given the investment horizon of 90 days Fanhua Inc is expected to under-perform the Crawford. In addition to that, Fanhua is 2.59 times more volatile than Crawford Company. It trades about -0.43 of its total potential returns per unit of risk. Crawford Company is currently generating about 0.09 per unit of volatility. If you would invest  901.00  in Crawford Company on February 1, 2024 and sell it today you would earn a total of  27.00  from holding Crawford Company or generate 3.0% return on investment over 90 days.

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

Fanhua Inc  vs.  Crawford Company

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 abnormal 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.

Crawford

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crawford Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Fanhua and Crawford

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

The idea behind Fanhua Inc and Crawford Company 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.