Correlation Between Anhui Huilong and Shanghai Lingyun

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

Diversification Opportunities for Anhui Huilong and Shanghai Lingyun

0.44

Correlation Coefficient

Anhui Huilong  Shanghai Lingyun

Very weak diversification

The 3 months correlation between Anhui and Shanghai is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Huilong Agricultural and Shanghai Lingyun Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Lingyun Ind 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 Lingyun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Lingyun Ind has no effect on the direction of Anhui Huilong i.e., Anhui Huilong and Shanghai Lingyun go up and down completely randomly.

Pair Corralation between Anhui Huilong and Shanghai Lingyun

Assuming the 90 days trading horizon Anhui Huilong Agricultural is expected to generate 0.81 times more return on investment than Shanghai Lingyun. However, Anhui Huilong Agricultural is 1.23 times less risky than Shanghai Lingyun. It trades about 0.0 of its potential returns per unit of risk. Shanghai Lingyun Industries is currently generating about -0.1 per unit of risk. If you would invest  548.00  in Anhui Huilong Agricultural on October 26, 2024 and sell it today you would lose (12.00) from holding Anhui Huilong Agricultural or give up 2.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Anhui Huilong Agricultural  vs.  Shanghai Lingyun Industries

Anhui Huilong Agricu

Risk-Adjusted Performance

0 of 100

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.

Shanghai Lingyun Ind

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai Lingyun Industries 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 Shanghai Lingyun

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

The idea behind Anhui Huilong Agricultural and Shanghai Lingyun Industries 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.