Correlation Between Anhui Gujing and Longjian Road

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

Diversification Opportunities for Anhui Gujing and Longjian Road

-0.09

Correlation Coefficient

Anhui Gujing  Longjian Road

Good diversification

The 3 months correlation between Anhui and Longjian is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Gujing Distillery and Longjian Road Bridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longjian Road Bridge 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 Longjian Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longjian Road Bridge has no effect on the direction of Anhui Gujing i.e., Anhui Gujing and Longjian Road go up and down completely randomly.

Pair Corralation between Anhui Gujing and Longjian Road

Assuming the 90 days trading horizon Anhui Gujing Distillery is expected to under-perform the Longjian Road. But the stock apears to be less risky and, when comparing its historical volatility, Anhui Gujing Distillery is 1.79 times less risky than Longjian Road. The stock trades about -0.25 of its potential returns per unit of risk. The Longjian Road Bridge is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  421.00  in Longjian Road Bridge on October 11, 2024 and sell it today you would lose (50.00) from holding Longjian Road Bridge or give up 11.88% of portfolio value over 90 days.

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

Anhui Gujing Distillery  vs.  Longjian Road Bridge

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Longjian Road Bridge

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Longjian Road Bridge are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Longjian Road may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Anhui Gujing and Longjian Road

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

The idea behind Anhui Gujing Distillery and Longjian Road Bridge 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.