Correlation Between Andon Health and Long Yuan

Can any of the company-specific risk be diversified away by investing in both Andon Health and Long Yuan 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 Andon Health and Long Yuan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Andon Health Co and Long Yuan Construction, you can compare the effects of market volatilities on Andon Health and Long Yuan 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 Andon Health with a short position of Long Yuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Andon Health and Long Yuan.

Diversification Opportunities for Andon Health and Long Yuan

0.34

Correlation Coefficient

Andon Health  Long Yuan

Weak diversification

The 3 months correlation between Andon and Long is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Andon Health Co and Long Yuan Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Long Yuan Construction and Andon Health 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 Andon Health Co are associated (or correlated) with Long Yuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Long Yuan Construction has no effect on the direction of Andon Health i.e., Andon Health and Long Yuan go up and down completely randomly.

Pair Corralation between Andon Health and Long Yuan

Assuming the 90 days trading horizon Andon Health Co is expected to generate 0.81 times more return on investment than Long Yuan. However, Andon Health Co is 1.24 times less risky than Long Yuan. It trades about 0.0 of its potential returns per unit of risk. Long Yuan Construction is currently generating about -0.02 per unit of risk. If you would invest  4,719  in Andon Health Co on October 4, 2024 and sell it today you would lose (641.00) from holding Andon Health Co or give up 13.58% of portfolio value over 90 days.

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

Andon Health Co  vs.  Long Yuan Construction

Andon Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Andon Health Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Long Yuan Construction

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Andon Health and Long Yuan

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

The idea behind Andon Health Co and Long Yuan Construction 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.