Correlation Between Chongqing Shunbo and Fujian Anjoy

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

Diversification Opportunities for Chongqing Shunbo and Fujian Anjoy

0.5

Correlation Coefficient

Chongqing Shunbo  Fujian Anjoy

Very weak diversification

The 3 months correlation between Chongqing and Fujian is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Shunbo Aluminum and Fujian Anjoy Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Anjoy Foods 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 Fujian Anjoy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Anjoy Foods has no effect on the direction of Chongqing Shunbo i.e., Chongqing Shunbo and Fujian Anjoy go up and down completely randomly.

Pair Corralation between Chongqing Shunbo and Fujian Anjoy

Assuming the 90 days trading horizon Chongqing Shunbo Aluminum is expected to generate 0.94 times more return on investment than Fujian Anjoy. However, Chongqing Shunbo Aluminum is 1.06 times less risky than Fujian Anjoy. It trades about 0.04 of its potential returns per unit of risk. Fujian Anjoy Foods is currently generating about -0.02 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	Weak
Accuracy	100.0%
Values	Daily Returns

Chongqing Shunbo Aluminum  vs.  Fujian Anjoy Foods

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.

Fujian Anjoy Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fujian Anjoy Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fujian Anjoy 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 Fujian Anjoy

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

The idea behind Chongqing Shunbo Aluminum and Fujian Anjoy Foods 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.