Correlation Between Nanjing Putian and Anhui Gujing

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

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

Diversification Opportunities for Nanjing Putian and Anhui Gujing

-0.12

Correlation Coefficient

Nanjing Putian  Anhui Gujing

Good diversification

The 3 months correlation between Nanjing and Anhui is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Nanjing Putian Telecommunicati 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 Nanjing Putian 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 Nanjing Putian Telecommunications 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 Nanjing Putian i.e., Nanjing Putian and Anhui Gujing go up and down completely randomly.

Pair Corralation between Nanjing Putian and Anhui Gujing

Assuming the 90 days trading horizon Nanjing Putian Telecommunications is expected to generate 3.01 times more return on investment than Anhui Gujing. However, Nanjing Putian is 3.01 times more volatile than Anhui Gujing Distillery. It trades about 0.11 of its potential returns per unit of risk. Anhui Gujing Distillery is currently generating about -0.04 per unit of risk. If you would invest  270.00  in Nanjing Putian Telecommunications on October 10, 2024 and sell it today you would earn a total of  80.00  from holding Nanjing Putian Telecommunications or generate 29.63% return on investment over 90 days.

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

Nanjing Putian Telecommunicati  vs.  Anhui Gujing Distillery

Nanjing Putian Telec

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nanjing Putian Telecommunications are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanjing Putian sustained solid returns over the last few months and may actually be approaching a breakup point.

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 somewhat strong basic indicators, Anhui Gujing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nanjing Putian and Anhui Gujing

The main advantage of trading using opposite Nanjing Putian and Anhui Gujing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nanjing Putian 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 Nanjing Putian Telecommunications 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.