Correlation Between Anhui Gujing and Rongcheer Industrial

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

Diversification Opportunities for Anhui Gujing and Rongcheer Industrial

0.9

Correlation Coefficient

Anhui Gujing  Rongcheer Industrial

Almost no diversification

The 3 months correlation between Anhui and Rongcheer is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Gujing Distillery and Rongcheer Industrial Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rongcheer Industrial 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 Rongcheer Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rongcheer Industrial has no effect on the direction of Anhui Gujing i.e., Anhui Gujing and Rongcheer Industrial go up and down completely randomly.

Pair Corralation between Anhui Gujing and Rongcheer Industrial

Assuming the 90 days trading horizon Anhui Gujing is expected to generate 1.06 times less return on investment than Rongcheer Industrial. But when comparing it to its historical volatility, Anhui Gujing Distillery is 1.23 times less risky than Rongcheer Industrial. It trades about 0.16 of its potential returns per unit of risk. Rongcheer Industrial Technology is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,313  in Rongcheer Industrial Technology on September 17, 2024 and sell it today you would earn a total of  1,692  from holding Rongcheer Industrial Technology or generate 39.23% return on investment over 90 days.

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

Anhui Gujing Distillery  vs.  Rongcheer Industrial Technolog

Anhui Gujing Distillery

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Gujing Distillery are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Gujing sustained solid returns over the last few months and may actually be approaching a breakup point.

Rongcheer Industrial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rongcheer Industrial Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Rongcheer Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anhui Gujing and Rongcheer Industrial

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

The idea behind Anhui Gujing Distillery and Rongcheer Industrial Technology 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.