Correlation Between State Grid and Anhui Yingjia

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

By analyzing existing cross correlation between State Grid InformationCommunication and Anhui Yingjia Distillery, you can compare the effects of market volatilities on State Grid and Anhui Yingjia 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 State Grid with a short position of Anhui Yingjia. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Grid and Anhui Yingjia.

Diversification Opportunities for State Grid and Anhui Yingjia

0.27

Correlation Coefficient

State Grid  Anhui Yingjia

Modest diversification

The 3 months correlation between State and Anhui is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding State Grid InformationCommunic and Anhui Yingjia Distillery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Yingjia Distillery and State Grid 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 State Grid InformationCommunication are associated (or correlated) with Anhui Yingjia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Yingjia Distillery has no effect on the direction of State Grid i.e., State Grid and Anhui Yingjia go up and down completely randomly.

Pair Corralation between State Grid and Anhui Yingjia

Assuming the 90 days trading horizon State Grid InformationCommunication is expected to under-perform the Anhui Yingjia. But the stock apears to be less risky and, when comparing its historical volatility, State Grid InformationCommunication is 1.01 times less risky than Anhui Yingjia. The stock trades about -0.35 of its potential returns per unit of risk. The Anhui Yingjia Distillery is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  6,005  in Anhui Yingjia Distillery on October 10, 2024 and sell it today you would lose (753.00) from holding Anhui Yingjia Distillery or give up 12.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

State Grid InformationCommunic  vs.  Anhui Yingjia Distillery

State Grid Informati

Risk-Adjusted Performance

0 of 100

Very Weak

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

Anhui Yingjia Distillery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anhui Yingjia Distillery 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with State Grid and Anhui Yingjia

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

The idea behind State Grid InformationCommunication and Anhui Yingjia Distillery 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.