Correlation Between Andon Health and Jinhui Liquor

Can any of the company-specific risk be diversified away by investing in both Andon Health and Jinhui Liquor 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 Jinhui Liquor 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 Jinhui Liquor Co, you can compare the effects of market volatilities on Andon Health and Jinhui Liquor 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 Jinhui Liquor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Andon Health and Jinhui Liquor.

Diversification Opportunities for Andon Health and Jinhui Liquor

0.79

Correlation Coefficient

Andon Health  Jinhui Liquor

Poor diversification

The 3 months correlation between Andon and Jinhui is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Andon Health Co and Jinhui Liquor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinhui Liquor 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 Jinhui Liquor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinhui Liquor has no effect on the direction of Andon Health i.e., Andon Health and Jinhui Liquor go up and down completely randomly.

Pair Corralation between Andon Health and Jinhui Liquor

Assuming the 90 days trading horizon Andon Health Co is expected to under-perform the Jinhui Liquor. But the stock apears to be less risky and, when comparing its historical volatility, Andon Health Co is 1.75 times less risky than Jinhui Liquor. The stock trades about -0.13 of its potential returns per unit of risk. The Jinhui Liquor Co is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  2,042  in Jinhui Liquor Co on September 26, 2024 and sell it today you would lose (58.00) from holding Jinhui Liquor Co or give up 2.84% of portfolio value over 90 days.

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

Andon Health Co  vs.  Jinhui Liquor Co

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 somewhat strong basic indicators, Andon Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jinhui Liquor

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jinhui Liquor Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jinhui Liquor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Andon Health and Jinhui Liquor

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

The idea behind Andon Health Co and Jinhui Liquor Co 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.