Correlation Between Chongqing Shunbo and Anhui Huilong

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

By analyzing existing cross correlation between Chongqing Shunbo Aluminum and Anhui Huilong Agricultural, you can compare the effects of market volatilities on Chongqing Shunbo and Anhui Huilong 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 Chongqing Shunbo with a short position of Anhui Huilong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Shunbo and Anhui Huilong.

Diversification Opportunities for Chongqing Shunbo and Anhui Huilong

0.32

Correlation Coefficient

Chongqing Shunbo  Anhui Huilong

Weak diversification

The 3 months correlation between Chongqing and Anhui is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Shunbo Aluminum and Anhui Huilong Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Huilong Agricu and Chongqing Shunbo 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 Chongqing Shunbo Aluminum are associated (or correlated) with Anhui Huilong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Huilong Agricu has no effect on the direction of Chongqing Shunbo i.e., Chongqing Shunbo and Anhui Huilong go up and down completely randomly.

Pair Corralation between Chongqing Shunbo and Anhui Huilong

Assuming the 90 days trading horizon Chongqing Shunbo Aluminum is expected to generate 1.12 times more return on investment than Anhui Huilong. However, Chongqing Shunbo is 1.12 times more volatile than Anhui Huilong Agricultural. It trades about 0.04 of its potential returns per unit of risk. Anhui Huilong Agricultural is currently generating about -0.01 per unit of risk. If you would invest  671.00  in Chongqing Shunbo Aluminum on December 26, 2024 and sell it today you would earn a total of  23.00  from holding Chongqing Shunbo Aluminum or generate 3.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Chongqing Shunbo Aluminum  vs.  Anhui Huilong Agricultural

Chongqing Shunbo Aluminum

Risk-Adjusted Performance

Insignificant

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

Anhui Huilong Agricu

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Chongqing Shunbo and Anhui Huilong

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

The idea behind Chongqing Shunbo Aluminum and Anhui Huilong Agricultural 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.

Check out your portfolio center.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.