Correlation Between Anhui Huilong and Guangzhou Haige

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

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

Diversification Opportunities for Anhui Huilong and Guangzhou Haige

0.88

Correlation Coefficient

Anhui Huilong  Guangzhou Haige

Very poor diversification

The 3 months correlation between Anhui and Guangzhou is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Huilong Agricultural and Guangzhou Haige Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Haige Comm and Anhui Huilong 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 Anhui Huilong Agricultural are associated (or correlated) with Guangzhou Haige. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Haige Comm has no effect on the direction of Anhui Huilong i.e., Anhui Huilong and Guangzhou Haige go up and down completely randomly.

Pair Corralation between Anhui Huilong and Guangzhou Haige

Assuming the 90 days trading horizon Anhui Huilong Agricultural is expected to under-perform the Guangzhou Haige. In addition to that, Anhui Huilong is 1.19 times more volatile than Guangzhou Haige Communications. It trades about -0.2 of its total potential returns per unit of risk. Guangzhou Haige Communications is currently generating about -0.07 per unit of volatility. If you would invest  1,257  in Guangzhou Haige Communications on September 22, 2024 and sell it today you would lose (63.00) from holding Guangzhou Haige Communications or give up 5.01% of portfolio value over 90 days.

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

Anhui Huilong Agricultural  vs.  Guangzhou Haige Communications

Anhui Huilong Agricu

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Huilong Agricultural are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Huilong sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangzhou Haige Comm

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Haige Communications are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Haige sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anhui Huilong and Guangzhou Haige

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

The idea behind Anhui Huilong Agricultural and Guangzhou Haige Communications 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 CEOs Directory module to screen CEOs from public companies around the world.