Correlation Between Anhui Deli and Western Metal

Can any of the company-specific risk be diversified away by investing in both Anhui Deli and Western Metal 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 Deli and Western Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Anhui Deli Household and Western Metal Materials, you can compare the effects of market volatilities on Anhui Deli and Western Metal 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 Deli with a short position of Western Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anhui Deli and Western Metal.

Diversification Opportunities for Anhui Deli and Western Metal

-0.08

Correlation Coefficient

Anhui Deli  Western Metal

Good diversification

The 3 months correlation between Anhui and Western is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Deli Household and Western Metal Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Metal Materials and Anhui Deli 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 Deli Household are associated (or correlated) with Western Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Metal Materials has no effect on the direction of Anhui Deli i.e., Anhui Deli and Western Metal go up and down completely randomly.

Pair Corralation between Anhui Deli and Western Metal

Assuming the 90 days trading horizon Anhui Deli Household is expected to under-perform the Western Metal. In addition to that, Anhui Deli is 1.22 times more volatile than Western Metal Materials. It trades about -0.04 of its total potential returns per unit of risk. Western Metal Materials is currently generating about 0.11 per unit of volatility. If you would invest  1,591  in Western Metal Materials on October 11, 2024 and sell it today you would earn a total of  124.00  from holding Western Metal Materials or generate 7.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Anhui Deli Household  vs.  Western Metal Materials

Anhui Deli Household

Risk-Adjusted Performance

4 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Deli Household are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Deli may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Western Metal Materials

Risk-Adjusted Performance

8 of 100

Modest

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

Pair Trading with Anhui Deli and Western Metal

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

The idea behind Anhui Deli Household and Western Metal Materials 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.