Correlation Between Anhui Gujing and Olympic Circuit

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

Diversification Opportunities for Anhui Gujing and Olympic Circuit

0.66

Correlation Coefficient

Anhui Gujing  Olympic Circuit

Poor diversification

The 3 months correlation between Anhui and Olympic is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Gujing Distillery and Olympic Circuit Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Circuit Tech 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 Olympic Circuit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olympic Circuit Tech has no effect on the direction of Anhui Gujing i.e., Anhui Gujing and Olympic Circuit go up and down completely randomly.

Pair Corralation between Anhui Gujing and Olympic Circuit

Assuming the 90 days trading horizon Anhui Gujing Distillery is expected to generate 0.5 times more return on investment than Olympic Circuit. However, Anhui Gujing Distillery is 2.02 times less risky than Olympic Circuit. It trades about -0.09 of its potential returns per unit of risk. Olympic Circuit Technology is currently generating about -0.1 per unit of risk. If you would invest  11,800  in Anhui Gujing Distillery on September 20, 2024 and sell it today you would lose (431.00) from holding Anhui Gujing Distillery or give up 3.65% of portfolio value over 90 days.

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

Anhui Gujing Distillery  vs.  Olympic Circuit Technology

Anhui Gujing Distillery

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Gujing Distillery are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Gujing sustained solid returns over the last few months and may actually be approaching a breakup point.

Olympic Circuit Tech

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Olympic Circuit Technology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Olympic Circuit sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anhui Gujing and Olympic Circuit

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

The idea behind Anhui Gujing Distillery and Olympic Circuit 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.