Correlation Between Anhui Gujing and Inner Mongolia

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

By analyzing existing cross correlation between Anhui Gujing Distillery and Inner Mongolia Furui, you can compare the effects of market volatilities on Anhui Gujing and Inner Mongolia 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 Anhui Gujing with a short position of Inner Mongolia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anhui Gujing and Inner Mongolia.

Diversification Opportunities for Anhui Gujing and Inner Mongolia

0.25

Correlation Coefficient

Anhui Gujing  Inner Mongolia

Modest diversification

The 3 months correlation between Anhui and Inner is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Gujing Distillery and Inner Mongolia Furui in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inner Mongolia Furui and Anhui Gujing 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 Anhui Gujing Distillery are associated (or correlated) with Inner Mongolia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inner Mongolia Furui has no effect on the direction of Anhui Gujing i.e., Anhui Gujing and Inner Mongolia go up and down completely randomly.

Pair Corralation between Anhui Gujing and Inner Mongolia

Assuming the 90 days trading horizon Anhui Gujing is expected to generate 1.25 times less return on investment than Inner Mongolia. But when comparing it to its historical volatility, Anhui Gujing Distillery is 1.39 times less risky than Inner Mongolia. It trades about 0.01 of its potential returns per unit of risk. Inner Mongolia Furui is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,388  in Inner Mongolia Furui on December 24, 2024 and sell it today you would lose (8.00) from holding Inner Mongolia Furui or give up 0.24% of portfolio value over 90 days.

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

Anhui Gujing Distillery  vs.  Inner Mongolia Furui

Anhui Gujing Distillery

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Gujing Distillery are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Anhui Gujing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Inner Mongolia Furui

Risk-Adjusted Performance

Very Weak

Over the last 90 days Inner Mongolia Furui has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Inner Mongolia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Anhui Gujing and Inner Mongolia

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

The idea behind Anhui Gujing Distillery and Inner Mongolia Furui 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.