Correlation Between Anhui Shiny and Guangzhou Boji

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

By analyzing existing cross correlation between Anhui Shiny Electronic and Guangzhou Boji Medical, you can compare the effects of market volatilities on Anhui Shiny and Guangzhou Boji 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 Shiny with a short position of Guangzhou Boji. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anhui Shiny and Guangzhou Boji.

Diversification Opportunities for Anhui Shiny and Guangzhou Boji

-0.46

Correlation Coefficient

Anhui Shiny  Guangzhou Boji

Very good diversification

The 3 months correlation between Anhui and Guangzhou is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Shiny Electronic and Guangzhou Boji Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Boji Medical and Anhui Shiny 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 Shiny Electronic are associated (or correlated) with Guangzhou Boji. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Boji Medical has no effect on the direction of Anhui Shiny i.e., Anhui Shiny and Guangzhou Boji go up and down completely randomly.

Pair Corralation between Anhui Shiny and Guangzhou Boji

Assuming the 90 days trading horizon Anhui Shiny Electronic is expected to generate 1.37 times more return on investment than Guangzhou Boji. However, Anhui Shiny is 1.37 times more volatile than Guangzhou Boji Medical. It trades about 0.06 of its potential returns per unit of risk. Guangzhou Boji Medical is currently generating about -0.03 per unit of risk. If you would invest  1,990  in Anhui Shiny Electronic on October 23, 2024 and sell it today you would earn a total of  227.00  from holding Anhui Shiny Electronic or generate 11.41% return on investment over 90 days.

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

Anhui Shiny Electronic  vs.  Guangzhou Boji Medical

Anhui Shiny Electronic

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Shiny Electronic are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Shiny sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangzhou Boji Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guangzhou Boji Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Guangzhou Boji 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 Shiny and Guangzhou Boji

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

The idea behind Anhui Shiny Electronic and Guangzhou Boji Medical 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.