Correlation Between Jiangsu Yanghe and Anhui Gujing

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

By analyzing existing cross correlation between Jiangsu Yanghe Brewery and Anhui Gujing Distillery, you can compare the effects of market volatilities on Jiangsu Yanghe and Anhui Gujing 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 Jiangsu Yanghe with a short position of Anhui Gujing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiangsu Yanghe and Anhui Gujing.

Diversification Opportunities for Jiangsu Yanghe and Anhui Gujing

0.16

Correlation Coefficient

Jiangsu Yanghe  Anhui Gujing

Average diversification

The 3 months correlation between Jiangsu and Anhui is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Yanghe Brewery and Anhui Gujing Distillery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Gujing Distillery and Jiangsu Yanghe 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 Jiangsu Yanghe Brewery are associated (or correlated) with Anhui Gujing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Gujing Distillery has no effect on the direction of Jiangsu Yanghe i.e., Jiangsu Yanghe and Anhui Gujing go up and down completely randomly.

Pair Corralation between Jiangsu Yanghe and Anhui Gujing

Assuming the 90 days trading horizon Jiangsu Yanghe Brewery is expected to under-perform the Anhui Gujing. But the stock apears to be less risky and, when comparing its historical volatility, Jiangsu Yanghe Brewery is 1.94 times less risky than Anhui Gujing. The stock trades about -0.07 of its potential returns per unit of risk. The Anhui Gujing Distillery is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  16,954  in Anhui Gujing Distillery on December 30, 2024 and sell it today you would earn a total of  355.00  from holding Anhui Gujing Distillery or generate 2.09% return on investment over 90 days.

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

Jiangsu Yanghe Brewery  vs.  Anhui Gujing Distillery

Jiangsu Yanghe Brewery

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jiangsu Yanghe Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jiangsu Yanghe is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Anhui Gujing Distillery

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Gujing Distillery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Anhui Gujing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jiangsu Yanghe and Anhui Gujing

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

The idea behind Jiangsu Yanghe Brewery and Anhui Gujing Distillery 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.