Correlation Between Penyao Environmental and Anhui Deli

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

By analyzing existing cross correlation between Penyao Environmental Protection and Anhui Deli Household, you can compare the effects of market volatilities on Penyao Environmental and Anhui Deli 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 Penyao Environmental with a short position of Anhui Deli. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penyao Environmental and Anhui Deli.

Diversification Opportunities for Penyao Environmental and Anhui Deli

0.02

Correlation Coefficient

Penyao Environmental  Anhui Deli

Significant diversification

The 3 months correlation between Penyao and Anhui is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Penyao Environmental Protectio and Anhui Deli Household in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Deli Household and Penyao Environmental 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 Penyao Environmental Protection are associated (or correlated) with Anhui Deli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Deli Household has no effect on the direction of Penyao Environmental i.e., Penyao Environmental and Anhui Deli go up and down completely randomly.

Pair Corralation between Penyao Environmental and Anhui Deli

Assuming the 90 days trading horizon Penyao Environmental Protection is expected to under-perform the Anhui Deli. But the stock apears to be less risky and, when comparing its historical volatility, Penyao Environmental Protection is 2.11 times less risky than Anhui Deli. The stock trades about -0.05 of its potential returns per unit of risk. The Anhui Deli Household is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  412.00  in Anhui Deli Household on December 25, 2024 and sell it today you would earn a total of  228.00  from holding Anhui Deli Household or generate 55.34% return on investment over 90 days.

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

Penyao Environmental Protectio  vs.  Anhui Deli Household

Penyao Environmental

Risk-Adjusted Performance

Very Weak

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

Anhui Deli Household

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Deli Household are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Deli sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penyao Environmental and Anhui Deli

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

The idea behind Penyao Environmental Protection and Anhui Deli Household 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.