Correlation Between Anhui Huilong and Dirui Industrial

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

Diversification Opportunities for Anhui Huilong and Dirui Industrial

0.22

Correlation Coefficient

Anhui Huilong  Dirui Industrial

Modest diversification

The 3 months correlation between Anhui and Dirui is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Huilong Agricultural and Dirui Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dirui Industrial 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 Dirui Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dirui Industrial has no effect on the direction of Anhui Huilong i.e., Anhui Huilong and Dirui Industrial go up and down completely randomly.

Pair Corralation between Anhui Huilong and Dirui Industrial

Assuming the 90 days trading horizon Anhui Huilong Agricultural is expected to generate 0.99 times more return on investment than Dirui Industrial. However, Anhui Huilong Agricultural is 1.01 times less risky than Dirui Industrial. It trades about -0.02 of its potential returns per unit of risk. Dirui Industrial Co is currently generating about -0.14 per unit of risk. If you would invest  569.00  in Anhui Huilong Agricultural on October 7, 2024 and sell it today you would lose (42.00) from holding Anhui Huilong Agricultural or give up 7.38% of portfolio value over 90 days.

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

Anhui Huilong Agricultural  vs.  Dirui Industrial Co

Anhui Huilong Agricu

Risk-Adjusted Performance

0 of 100

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

Dirui Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dirui Industrial 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.

Pair Trading with Anhui Huilong and Dirui Industrial

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

The idea behind Anhui Huilong Agricultural and Dirui Industrial 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.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.