Correlation Between Anhui Gujing and Shandong Homey

Can any of the company-specific risk be diversified away by investing in both Anhui Gujing and Shandong Homey 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 Shandong Homey 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 Shandong Homey Aquatic, you can compare the effects of market volatilities on Anhui Gujing and Shandong Homey 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 Shandong Homey. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anhui Gujing and Shandong Homey.

Diversification Opportunities for Anhui Gujing and Shandong Homey

-0.09

Correlation Coefficient

Anhui Gujing  Shandong Homey

Good diversification

The 3 months correlation between Anhui and Shandong is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Gujing Distillery and Shandong Homey Aquatic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Homey Aquatic 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 Shandong Homey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Homey Aquatic has no effect on the direction of Anhui Gujing i.e., Anhui Gujing and Shandong Homey go up and down completely randomly.

Pair Corralation between Anhui Gujing and Shandong Homey

Assuming the 90 days trading horizon Anhui Gujing Distillery is expected to generate 0.76 times more return on investment than Shandong Homey. However, Anhui Gujing Distillery is 1.32 times less risky than Shandong Homey. It trades about 0.17 of its potential returns per unit of risk. Shandong Homey Aquatic is currently generating about 0.03 per unit of risk. If you would invest  11,179  in Anhui Gujing Distillery on November 19, 2024 and sell it today you would earn a total of  370.00  from holding Anhui Gujing Distillery or generate 3.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Anhui Gujing Distillery  vs.  Shandong Homey Aquatic

Anhui Gujing Distillery

Risk-Adjusted Performance

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.

Shandong Homey Aquatic

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Anhui Gujing and Shandong Homey

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

The idea behind Anhui Gujing Distillery and Shandong Homey Aquatic 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.