Correlation Between Shandong Longda and Anhui Deli

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

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

Diversification Opportunities for Shandong Longda and Anhui Deli

0.05

Correlation Coefficient

Shandong Longda  Anhui Deli

Significant diversification

The 3 months correlation between Shandong and Anhui is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Longda Meat and Anhui Deli Household in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Deli Household and Shandong Longda 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 Shandong Longda Meat are associated (or correlated) with Anhui Deli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Deli Household has no effect on the direction of Shandong Longda i.e., Shandong Longda and Anhui Deli go up and down completely randomly.

Pair Corralation between Shandong Longda and Anhui Deli

Assuming the 90 days trading horizon Shandong Longda Meat is expected to generate 0.57 times more return on investment than Anhui Deli. However, Shandong Longda Meat is 1.75 times less risky than Anhui Deli. It trades about -0.01 of its potential returns per unit of risk. Anhui Deli Household is currently generating about -0.02 per unit of risk. If you would invest  926.00  in Shandong Longda Meat on October 5, 2024 and sell it today you would lose (141.00) from holding Shandong Longda Meat or give up 15.23% of portfolio value over 90 days.

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

Shandong Longda Meat  vs.  Anhui Deli Household

Shandong Longda Meat

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Longda Meat are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shandong Longda is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Anhui Deli Household

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anhui Deli Household 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 Shandong Longda and Anhui Deli

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

The idea behind Shandong Longda Meat and Anhui Deli Household 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.