Correlation Between Anhui Huilong and China Galaxy

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

Diversification Opportunities for Anhui Huilong and China Galaxy

0.55

Correlation Coefficient

Anhui Huilong  China Galaxy

Very weak diversification

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

Pair Corralation between Anhui Huilong and China Galaxy

Assuming the 90 days trading horizon Anhui Huilong Agricultural is expected to under-perform the China Galaxy. But the stock apears to be less risky and, when comparing its historical volatility, Anhui Huilong Agricultural is 1.26 times less risky than China Galaxy. The stock trades about -0.43 of its potential returns per unit of risk. The China Galaxy Securities is currently generating about -0.29 of returns per unit of risk over similar time horizon. If you would invest  1,572  in China Galaxy Securities on October 10, 2024 and sell it today you would lose (215.00) from holding China Galaxy Securities or give up 13.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Anhui Huilong Agricultural  vs.  China Galaxy Securities

Anhui Huilong Agricu

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Huilong Agricultural are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

China Galaxy Securities

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Anhui Huilong and China Galaxy

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

The idea behind Anhui Huilong Agricultural and China Galaxy Securities 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .