Correlation Between Anhui Deli and Westone Information

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

Diversification Opportunities for Anhui Deli and Westone Information

0.74

Correlation Coefficient

Anhui Deli  Westone Information

Poor diversification

The 3 months correlation between Anhui and Westone is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Deli Household and Westone Information Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westone Information 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 Westone Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westone Information has no effect on the direction of Anhui Deli i.e., Anhui Deli and Westone Information go up and down completely randomly.

Pair Corralation between Anhui Deli and Westone Information

Assuming the 90 days trading horizon Anhui Deli is expected to generate 7.59 times less return on investment than Westone Information. But when comparing it to its historical volatility, Anhui Deli Household is 1.04 times less risky than Westone Information. It trades about 0.01 of its potential returns per unit of risk. Westone Information Industry is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,435  in Westone Information Industry on September 26, 2024 and sell it today you would earn a total of  281.00  from holding Westone Information Industry or generate 19.58% return on investment over 90 days.

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

Anhui Deli Household  vs.  Westone Information Industry

Anhui Deli Household

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Deli Household are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Anhui Deli is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Westone Information

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Westone Information Industry are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Westone Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anhui Deli and Westone Information

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

The idea behind Anhui Deli Household and Westone Information Industry 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.