Correlation Between Anhui Huilong and Shanghai Pudong

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

Diversification Opportunities for Anhui Huilong and Shanghai Pudong

0.34

Correlation Coefficient

Anhui Huilong  Shanghai Pudong

Weak diversification

The 3 months correlation between Anhui and Shanghai is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Huilong Agricultural and Shanghai Pudong Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Pudong Deve 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 Shanghai Pudong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Pudong Deve has no effect on the direction of Anhui Huilong i.e., Anhui Huilong and Shanghai Pudong go up and down completely randomly.

Pair Corralation between Anhui Huilong and Shanghai Pudong

Assuming the 90 days trading horizon Anhui Huilong Agricultural is expected to under-perform the Shanghai Pudong. In addition to that, Anhui Huilong is 1.96 times more volatile than Shanghai Pudong Development. It trades about -0.01 of its total potential returns per unit of risk. Shanghai Pudong Development is currently generating about 0.06 per unit of volatility. If you would invest  697.00  in Shanghai Pudong Development on September 20, 2024 and sell it today you would earn a total of  257.00  from holding Shanghai Pudong Development or generate 36.87% return on investment over 90 days.

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

Anhui Huilong Agricultural  vs.  Shanghai Pudong Development

Anhui Huilong Agricu

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Huilong Agricultural are ranked lower than 13 (%) 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.

Shanghai Pudong Deve

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Pudong Development are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Pudong sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anhui Huilong and Shanghai Pudong

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

The idea behind Anhui Huilong Agricultural and Shanghai Pudong Development 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.