Correlation Between Anhui Deli and Anhui Gujing

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

Diversification Opportunities for Anhui Deli and Anhui Gujing

0.42

Correlation Coefficient

Anhui Deli  Anhui Gujing

Very weak diversification

The 3 months correlation between Anhui and Anhui is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Deli Household and Anhui Gujing Distillery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Gujing Distillery 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 Anhui Gujing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Gujing Distillery has no effect on the direction of Anhui Deli i.e., Anhui Deli and Anhui Gujing go up and down completely randomly.

Pair Corralation between Anhui Deli and Anhui Gujing

Assuming the 90 days trading horizon Anhui Deli Household is expected to generate 2.63 times more return on investment than Anhui Gujing. However, Anhui Deli is 2.63 times more volatile than Anhui Gujing Distillery. It trades about 0.34 of its potential returns per unit of risk. Anhui Gujing Distillery is currently generating about 0.32 per unit of risk. If you would invest  413.00  in Anhui Deli Household on December 4, 2024 and sell it today you would earn a total of  92.00  from holding Anhui Deli Household or generate 22.28% return on investment over 90 days.

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

Anhui Deli Household  vs.  Anhui Gujing Distillery

Anhui Deli Household

Risk-Adjusted Performance

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 weak basic indicators, Anhui Deli may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Anhui Gujing Distillery

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Gujing Distillery are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Gujing may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Anhui Deli and Anhui Gujing

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

The idea behind Anhui Deli Household and Anhui Gujing Distillery 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.