Correlation Between Anhui Huaren and Shenzhen Glory

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

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

Diversification Opportunities for Anhui Huaren and Shenzhen Glory

0.69

Correlation Coefficient

Anhui Huaren  Shenzhen Glory

Poor diversification

The 3 months correlation between Anhui and Shenzhen is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Huaren Health and Shenzhen Glory Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Glory Medical and Anhui Huaren 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 Huaren Health are associated (or correlated) with Shenzhen Glory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Glory Medical has no effect on the direction of Anhui Huaren i.e., Anhui Huaren and Shenzhen Glory go up and down completely randomly.

Pair Corralation between Anhui Huaren and Shenzhen Glory

Assuming the 90 days trading horizon Anhui Huaren Health is expected to generate 0.92 times more return on investment than Shenzhen Glory. However, Anhui Huaren Health is 1.09 times less risky than Shenzhen Glory. It trades about -0.07 of its potential returns per unit of risk. Shenzhen Glory Medical is currently generating about -0.12 per unit of risk. If you would invest  1,152  in Anhui Huaren Health on October 23, 2024 and sell it today you would lose (39.00) from holding Anhui Huaren Health or give up 3.39% of portfolio value over 90 days.

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

Anhui Huaren Health  vs.  Shenzhen Glory Medical

Anhui Huaren Health

Risk-Adjusted Performance

0 of 100

Very Weak

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

Shenzhen Glory Medical

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Glory Medical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shenzhen Glory 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 Huaren and Shenzhen Glory

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

The idea behind Anhui Huaren Health and Shenzhen Glory 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.

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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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.