Correlation Between Anhui Gujing and Suzhou TFC

Can any of the company-specific risk be diversified away by investing in both Anhui Gujing and Suzhou TFC 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 Suzhou TFC 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 Suzhou TFC Optical, you can compare the effects of market volatilities on Anhui Gujing and Suzhou TFC 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 Suzhou TFC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anhui Gujing and Suzhou TFC.

Diversification Opportunities for Anhui Gujing and Suzhou TFC

0.68

Correlation Coefficient

Anhui Gujing  Suzhou TFC

Poor diversification

The 3 months correlation between Anhui and Suzhou is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Gujing Distillery and Suzhou TFC Optical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou TFC Optical 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 Suzhou TFC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou TFC Optical has no effect on the direction of Anhui Gujing i.e., Anhui Gujing and Suzhou TFC go up and down completely randomly.

Pair Corralation between Anhui Gujing and Suzhou TFC

Assuming the 90 days trading horizon Anhui Gujing Distillery is expected to generate 0.7 times more return on investment than Suzhou TFC. However, Anhui Gujing Distillery is 1.44 times less risky than Suzhou TFC. It trades about -0.13 of its potential returns per unit of risk. Suzhou TFC Optical is currently generating about -0.26 per unit of risk. If you would invest  20,048  in Anhui Gujing Distillery on October 6, 2024 and sell it today you would lose (2,850) from holding Anhui Gujing Distillery or give up 14.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.73%
Values	Daily Returns

Anhui Gujing Distillery  vs.  Suzhou TFC Optical

Anhui Gujing Distillery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anhui Gujing Distillery 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 somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Suzhou TFC Optical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suzhou TFC Optical 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 somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Anhui Gujing and Suzhou TFC

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

The idea behind Anhui Gujing Distillery and Suzhou TFC Optical 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.