Correlation Between Anhui Tongguan and Beijing HuaYuanYiTong

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

By analyzing existing cross correlation between Anhui Tongguan Copper and Beijing HuaYuanYiTong Thermal, you can compare the effects of market volatilities on Anhui Tongguan and Beijing HuaYuanYiTong 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 Tongguan with a short position of Beijing HuaYuanYiTong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anhui Tongguan and Beijing HuaYuanYiTong.

Diversification Opportunities for Anhui Tongguan and Beijing HuaYuanYiTong

0.84

Correlation Coefficient

Anhui Tongguan  Beijing HuaYuanYiTong

Very poor diversification

The 3 months correlation between Anhui and Beijing is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Tongguan Copper and Beijing HuaYuanYiTong Thermal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing HuaYuanYiTong and Anhui Tongguan 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 Tongguan Copper are associated (or correlated) with Beijing HuaYuanYiTong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing HuaYuanYiTong has no effect on the direction of Anhui Tongguan i.e., Anhui Tongguan and Beijing HuaYuanYiTong go up and down completely randomly.

Pair Corralation between Anhui Tongguan and Beijing HuaYuanYiTong

Assuming the 90 days trading horizon Anhui Tongguan Copper is expected to under-perform the Beijing HuaYuanYiTong. But the stock apears to be less risky and, when comparing its historical volatility, Anhui Tongguan Copper is 1.64 times less risky than Beijing HuaYuanYiTong. The stock trades about -0.14 of its potential returns per unit of risk. The Beijing HuaYuanYiTong Thermal is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,194  in Beijing HuaYuanYiTong Thermal on September 20, 2024 and sell it today you would lose (64.00) from holding Beijing HuaYuanYiTong Thermal or give up 5.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Anhui Tongguan Copper  vs.  Beijing HuaYuanYiTong Thermal

Anhui Tongguan Copper

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Tongguan Copper are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Tongguan sustained solid returns over the last few months and may actually be approaching a breakup point.

Beijing HuaYuanYiTong

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing HuaYuanYiTong Thermal are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing HuaYuanYiTong sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anhui Tongguan and Beijing HuaYuanYiTong

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

The idea behind Anhui Tongguan Copper and Beijing HuaYuanYiTong Thermal 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.