Correlation Between Anhui Huaren and Zhongtong Guomai

Can any of the company-specific risk be diversified away by investing in both Anhui Huaren and Zhongtong Guomai 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 Zhongtong Guomai 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 Zhongtong Guomai Communication, you can compare the effects of market volatilities on Anhui Huaren and Zhongtong Guomai 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 Zhongtong Guomai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anhui Huaren and Zhongtong Guomai.

Diversification Opportunities for Anhui Huaren and Zhongtong Guomai

0.63

Correlation Coefficient

Anhui Huaren  Zhongtong Guomai

Poor diversification

The 3 months correlation between Anhui and Zhongtong is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Huaren Health and Zhongtong Guomai Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongtong Guomai Com 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 Zhongtong Guomai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongtong Guomai Com has no effect on the direction of Anhui Huaren i.e., Anhui Huaren and Zhongtong Guomai go up and down completely randomly.

Pair Corralation between Anhui Huaren and Zhongtong Guomai

Assuming the 90 days trading horizon Anhui Huaren Health is expected to generate 0.44 times more return on investment than Zhongtong Guomai. However, Anhui Huaren Health is 2.29 times less risky than Zhongtong Guomai. It trades about -0.1 of its potential returns per unit of risk. Zhongtong Guomai Communication is currently generating about -0.17 per unit of risk. If you would invest  1,239  in Anhui Huaren Health on October 1, 2024 and sell it today you would lose (81.00) from holding Anhui Huaren Health or give up 6.54% 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.  Zhongtong Guomai Communication

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Zhongtong Guomai Com

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Anhui Huaren and Zhongtong Guomai

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

The idea behind Anhui Huaren Health and Zhongtong Guomai Communication 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.