Correlation Between Anhui Huilong and Liaoning Chengda

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

Diversification Opportunities for Anhui Huilong and Liaoning Chengda

0.35

Correlation Coefficient

Anhui Huilong  Liaoning Chengda

Weak diversification

The 3 months correlation between Anhui and Liaoning is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Huilong Agricultural and Liaoning Chengda Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liaoning Chengda Bio 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 Liaoning Chengda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liaoning Chengda Bio has no effect on the direction of Anhui Huilong i.e., Anhui Huilong and Liaoning Chengda go up and down completely randomly.

Pair Corralation between Anhui Huilong and Liaoning Chengda

Assuming the 90 days trading horizon Anhui Huilong Agricultural is expected to generate 2.03 times more return on investment than Liaoning Chengda. However, Anhui Huilong is 2.03 times more volatile than Liaoning Chengda Biotechnology. It trades about 0.03 of its potential returns per unit of risk. Liaoning Chengda Biotechnology is currently generating about -0.08 per unit of risk. If you would invest  519.00  in Anhui Huilong Agricultural on October 12, 2024 and sell it today you would earn a total of  11.00  from holding Anhui Huilong Agricultural or generate 2.12% 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.  Liaoning Chengda Biotechnology

Anhui Huilong Agricu

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Huilong Agricultural are ranked lower than 2 (%) 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.

Liaoning Chengda Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liaoning Chengda Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Anhui Huilong and Liaoning Chengda

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

The idea behind Anhui Huilong Agricultural and Liaoning Chengda Biotechnology 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.