Correlation Between Anhui Gujing and Kunwu Jiuding

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

Diversification Opportunities for Anhui Gujing and Kunwu Jiuding

0.85

Correlation Coefficient

Anhui Gujing  Kunwu Jiuding

Very poor diversification

The 3 months correlation between Anhui and Kunwu is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Gujing Distillery and Kunwu Jiuding Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kunwu Jiuding Investment 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 Kunwu Jiuding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kunwu Jiuding Investment has no effect on the direction of Anhui Gujing i.e., Anhui Gujing and Kunwu Jiuding go up and down completely randomly.

Pair Corralation between Anhui Gujing and Kunwu Jiuding

Assuming the 90 days trading horizon Anhui Gujing Distillery is expected to generate 0.93 times more return on investment than Kunwu Jiuding. However, Anhui Gujing Distillery is 1.07 times less risky than Kunwu Jiuding. It trades about 0.19 of its potential returns per unit of risk. Kunwu Jiuding Investment is currently generating about 0.12 per unit of risk. If you would invest  14,060  in Anhui Gujing Distillery on September 14, 2024 and sell it today you would earn a total of  6,462  from holding Anhui Gujing Distillery or generate 45.96% return on investment over 90 days.

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

Anhui Gujing Distillery  vs.  Kunwu Jiuding Investment

Anhui Gujing Distillery

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Gujing Distillery are ranked lower than 14 (%) 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.

Kunwu Jiuding Investment

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kunwu Jiuding Investment are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kunwu Jiuding sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anhui Gujing and Kunwu Jiuding

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

The idea behind Anhui Gujing Distillery and Kunwu Jiuding Investment 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.