Correlation Between Anhui Deli and Hubeiyichang Transportation

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

Diversification Opportunities for Anhui Deli and Hubeiyichang Transportation

0.92

Correlation Coefficient

Anhui Deli  Hubeiyichang Transportation

Almost no diversification

The 3 months correlation between Anhui and Hubeiyichang is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Deli Household and Hubeiyichang Transportation Gr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hubeiyichang Transportation 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 Hubeiyichang Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hubeiyichang Transportation has no effect on the direction of Anhui Deli i.e., Anhui Deli and Hubeiyichang Transportation go up and down completely randomly.

Pair Corralation between Anhui Deli and Hubeiyichang Transportation

Assuming the 90 days trading horizon Anhui Deli Household is expected to under-perform the Hubeiyichang Transportation. In addition to that, Anhui Deli is 1.57 times more volatile than Hubeiyichang Transportation Group. It trades about -0.18 of its total potential returns per unit of risk. Hubeiyichang Transportation Group is currently generating about -0.02 per unit of volatility. If you would invest  524.00  in Hubeiyichang Transportation Group on September 25, 2024 and sell it today you would lose (7.00) from holding Hubeiyichang Transportation Group or give up 1.34% of portfolio value over 90 days.

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

Anhui Deli Household  vs.  Hubeiyichang Transportation Gr

Anhui Deli Household

Risk-Adjusted Performance

2 of 100

Weak

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

Hubeiyichang Transportation

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hubeiyichang Transportation Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hubeiyichang Transportation may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Anhui Deli and Hubeiyichang Transportation

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

The idea behind Anhui Deli Household and Hubeiyichang Transportation Group 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.