Correlation Between Huaxi Securities and Anhui Gujing

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

By analyzing existing cross correlation between Huaxi Securities Co and Anhui Gujing Distillery, you can compare the effects of market volatilities on Huaxi Securities 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 Huaxi Securities with a short position of Anhui Gujing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huaxi Securities and Anhui Gujing.

Diversification Opportunities for Huaxi Securities and Anhui Gujing

0.66

Correlation Coefficient

Huaxi Securities  Anhui Gujing

Poor diversification

The 3 months correlation between Huaxi and Anhui is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Huaxi Securities Co 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 Huaxi Securities 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 Huaxi Securities Co 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 Huaxi Securities i.e., Huaxi Securities and Anhui Gujing go up and down completely randomly.

Pair Corralation between Huaxi Securities and Anhui Gujing

Assuming the 90 days trading horizon Huaxi Securities Co is expected to generate 0.85 times more return on investment than Anhui Gujing. However, Huaxi Securities Co is 1.18 times less risky than Anhui Gujing. It trades about 0.06 of its potential returns per unit of risk. Anhui Gujing Distillery is currently generating about -0.02 per unit of risk. If you would invest  664.00  in Huaxi Securities Co on October 2, 2024 and sell it today you would earn a total of  167.00  from holding Huaxi Securities Co or generate 25.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.54%
Values	Daily Returns

Huaxi Securities Co  vs.  Anhui Gujing Distillery

Huaxi Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huaxi Securities Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Anhui Gujing Distillery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anhui Gujing Distillery 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Huaxi Securities and Anhui Gujing

The main advantage of trading using opposite Huaxi Securities and Anhui Gujing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huaxi Securities 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 Huaxi Securities Co 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .