Correlation Between Anhui Gujing and China Life

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

Diversification Opportunities for Anhui Gujing and China Life

0.96

Correlation Coefficient

Anhui Gujing  China Life

Almost no diversification

The 3 months correlation between Anhui and China is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Gujing Distillery and China Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Life Insurance 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 China Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Life Insurance has no effect on the direction of Anhui Gujing i.e., Anhui Gujing and China Life go up and down completely randomly.

Pair Corralation between Anhui Gujing and China Life

Assuming the 90 days trading horizon Anhui Gujing Distillery is expected to under-perform the China Life. In addition to that, Anhui Gujing is 1.28 times more volatile than China Life Insurance. It trades about -0.12 of its total potential returns per unit of risk. China Life Insurance is currently generating about 0.05 per unit of volatility. If you would invest  4,096  in China Life Insurance on September 25, 2024 and sell it today you would earn a total of  58.00  from holding China Life Insurance or generate 1.42% 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.  China Life Insurance

Anhui Gujing Distillery

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Gujing Distillery are ranked lower than 6 (%) 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.

China Life Insurance

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Life Insurance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Life sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anhui Gujing and China Life

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

The idea behind Anhui Gujing Distillery and China Life Insurance 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.