Correlation Between Huasi Agricultural and Anhui Huilong

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

By analyzing existing cross correlation between Huasi Agricultural Development and Anhui Huilong Agricultural, you can compare the effects of market volatilities on Huasi Agricultural and Anhui Huilong 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 Huasi Agricultural with a short position of Anhui Huilong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huasi Agricultural and Anhui Huilong.

Diversification Opportunities for Huasi Agricultural and Anhui Huilong

0.55

Correlation Coefficient

Huasi Agricultural  Anhui Huilong

Very weak diversification

The 3 months correlation between Huasi and Anhui is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Huasi Agricultural Development and Anhui Huilong Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Huilong Agricu and Huasi Agricultural 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 Huasi Agricultural Development are associated (or correlated) with Anhui Huilong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Huilong Agricu has no effect on the direction of Huasi Agricultural i.e., Huasi Agricultural and Anhui Huilong go up and down completely randomly.

Pair Corralation between Huasi Agricultural and Anhui Huilong

Assuming the 90 days trading horizon Huasi Agricultural Development is expected to generate 1.92 times more return on investment than Anhui Huilong. However, Huasi Agricultural is 1.92 times more volatile than Anhui Huilong Agricultural. It trades about -0.01 of its potential returns per unit of risk. Anhui Huilong Agricultural is currently generating about -0.19 per unit of risk. If you would invest  446.00  in Huasi Agricultural Development on December 2, 2024 and sell it today you would lose (22.00) from holding Huasi Agricultural Development or give up 4.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Huasi Agricultural Development  vs.  Anhui Huilong Agricultural

Huasi Agricultural

Risk-Adjusted Performance

Very Weak

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

Anhui Huilong Agricu

Risk-Adjusted Performance

Very Weak

Over the last 90 days Anhui Huilong Agricultural 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Huasi Agricultural and Anhui Huilong

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

The idea behind Huasi Agricultural Development and Anhui Huilong Agricultural 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.