Correlation Between Anhui Gujing and Contemporary Amperex

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

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

Diversification Opportunities for Anhui Gujing and Contemporary Amperex

0.88

Correlation Coefficient

Anhui Gujing  Contemporary Amperex

Very poor diversification

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

Pair Corralation between Anhui Gujing and Contemporary Amperex

Assuming the 90 days trading horizon Anhui Gujing is expected to generate 4.34 times less return on investment than Contemporary Amperex. But when comparing it to its historical volatility, Anhui Gujing Distillery is 1.56 times less risky than Contemporary Amperex. It trades about 0.05 of its potential returns per unit of risk. Contemporary Amperex Technology is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  18,680  in Contemporary Amperex Technology on September 5, 2024 and sell it today you would earn a total of  7,504  from holding Contemporary Amperex Technology or generate 40.17% return on investment over 90 days.

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

Anhui Gujing Distillery  vs.  Contemporary Amperex Technolog

Anhui Gujing Distillery

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Gujing Distillery are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Gujing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Contemporary Amperex

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Contemporary Amperex Technology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Contemporary Amperex sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anhui Gujing and Contemporary Amperex

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

The idea behind Anhui Gujing Distillery and Contemporary Amperex Technology 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.