Correlation Between Wangneng Environment and Anhui Shiny

Can any of the company-specific risk be diversified away by investing in both Wangneng Environment and Anhui Shiny 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 Wangneng Environment and Anhui Shiny into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wangneng Environment Co and Anhui Shiny Electronic, you can compare the effects of market volatilities on Wangneng Environment and Anhui Shiny 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 Wangneng Environment with a short position of Anhui Shiny. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wangneng Environment and Anhui Shiny.

Diversification Opportunities for Wangneng Environment and Anhui Shiny

0.65

Correlation Coefficient

Wangneng Environment  Anhui Shiny

Poor diversification

The 3 months correlation between Wangneng and Anhui is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Wangneng Environment Co and Anhui Shiny Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Shiny Electronic and Wangneng Environment 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 Wangneng Environment Co are associated (or correlated) with Anhui Shiny. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Shiny Electronic has no effect on the direction of Wangneng Environment i.e., Wangneng Environment and Anhui Shiny go up and down completely randomly.

Pair Corralation between Wangneng Environment and Anhui Shiny

Assuming the 90 days trading horizon Wangneng Environment is expected to generate 1.21 times less return on investment than Anhui Shiny. But when comparing it to its historical volatility, Wangneng Environment Co is 1.26 times less risky than Anhui Shiny. It trades about 0.1 of its potential returns per unit of risk. Anhui Shiny Electronic is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,166  in Anhui Shiny Electronic on December 27, 2024 and sell it today you would earn a total of  384.00  from holding Anhui Shiny Electronic or generate 17.73% return on investment over 90 days.

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

Wangneng Environment Co  vs.  Anhui Shiny Electronic

Wangneng Environment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wangneng Environment Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wangneng Environment sustained solid returns over the last few months and may actually be approaching a breakup point.

Anhui Shiny Electronic

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Shiny Electronic are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Shiny sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wangneng Environment and Anhui Shiny

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

The idea behind Wangneng Environment Co and Anhui Shiny Electronic 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.