Correlation Between DO Home and Anji Foodstuff

Can any of the company-specific risk be diversified away by investing in both DO Home and Anji Foodstuff 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 DO Home and Anji Foodstuff into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DO Home Collection and Anji Foodstuff Co, you can compare the effects of market volatilities on DO Home and Anji Foodstuff 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 DO Home with a short position of Anji Foodstuff. Check out your portfolio center. Please also check ongoing floating volatility patterns of DO Home and Anji Foodstuff.

Diversification Opportunities for DO Home and Anji Foodstuff

0.88

Correlation Coefficient

DO Home  Anji Foodstuff

Very poor diversification

The 3 months correlation between 002798 and Anji is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding DO Home Collection and Anji Foodstuff Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anji Foodstuff and DO Home 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 DO Home Collection are associated (or correlated) with Anji Foodstuff. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anji Foodstuff has no effect on the direction of DO Home i.e., DO Home and Anji Foodstuff go up and down completely randomly.

Pair Corralation between DO Home and Anji Foodstuff

Assuming the 90 days trading horizon DO Home Collection is expected to generate 1.38 times more return on investment than Anji Foodstuff. However, DO Home is 1.38 times more volatile than Anji Foodstuff Co. It trades about 0.03 of its potential returns per unit of risk. Anji Foodstuff Co is currently generating about -0.01 per unit of risk. If you would invest  393.00  in DO Home Collection on December 24, 2024 and sell it today you would earn a total of  9.00  from holding DO Home Collection or generate 2.29% return on investment over 90 days.

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

DO Home Collection  vs.  Anji Foodstuff Co

DO Home Collection

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DO Home Collection are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, DO Home is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Anji Foodstuff

Risk-Adjusted Performance

Very Weak

Over the last 90 days Anji Foodstuff Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Anji Foodstuff is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with DO Home and Anji Foodstuff

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

The idea behind DO Home Collection and Anji Foodstuff Co 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.