Correlation Between Sichuan Qiaoyuan and Anhui Estone

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

By analyzing existing cross correlation between Sichuan Qiaoyuan Gas and Anhui Estone Materials, you can compare the effects of market volatilities on Sichuan Qiaoyuan and Anhui Estone 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 Sichuan Qiaoyuan with a short position of Anhui Estone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sichuan Qiaoyuan and Anhui Estone.

Diversification Opportunities for Sichuan Qiaoyuan and Anhui Estone

0.61

Correlation Coefficient

Sichuan Qiaoyuan  Anhui Estone

Poor diversification

The 3 months correlation between Sichuan and Anhui is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Qiaoyuan Gas and Anhui Estone Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Estone Materials and Sichuan Qiaoyuan 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 Sichuan Qiaoyuan Gas are associated (or correlated) with Anhui Estone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Estone Materials has no effect on the direction of Sichuan Qiaoyuan i.e., Sichuan Qiaoyuan and Anhui Estone go up and down completely randomly.

Pair Corralation between Sichuan Qiaoyuan and Anhui Estone

Assuming the 90 days trading horizon Sichuan Qiaoyuan is expected to generate 1.06 times less return on investment than Anhui Estone. But when comparing it to its historical volatility, Sichuan Qiaoyuan Gas is 1.54 times less risky than Anhui Estone. It trades about 0.08 of its potential returns per unit of risk. Anhui Estone Materials is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,830  in Anhui Estone Materials on October 23, 2024 and sell it today you would earn a total of  163.00  from holding Anhui Estone Materials or generate 8.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Sichuan Qiaoyuan Gas  vs.  Anhui Estone Materials

Sichuan Qiaoyuan Gas

Risk-Adjusted Performance

5 of 100

Modest

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

Anhui Estone Materials

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Estone Materials are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Estone sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sichuan Qiaoyuan and Anhui Estone

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

The idea behind Sichuan Qiaoyuan Gas and Anhui Estone Materials 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.