Correlation Between China Sports and Anyang Iron

Can any of the company-specific risk be diversified away by investing in both China Sports and Anyang Iron 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 China Sports and Anyang Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Sports Industry and Anyang Iron Steel, you can compare the effects of market volatilities on China Sports and Anyang Iron 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 China Sports with a short position of Anyang Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Sports and Anyang Iron.

Diversification Opportunities for China Sports and Anyang Iron

0.81

Correlation Coefficient

China Sports  Anyang Iron

Very poor diversification

The 3 months correlation between China and Anyang is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding China Sports Industry and Anyang Iron Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anyang Iron Steel and China Sports 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 China Sports Industry are associated (or correlated) with Anyang Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anyang Iron Steel has no effect on the direction of China Sports i.e., China Sports and Anyang Iron go up and down completely randomly.

Pair Corralation between China Sports and Anyang Iron

Assuming the 90 days trading horizon China Sports Industry is expected to generate 0.76 times more return on investment than Anyang Iron. However, China Sports Industry is 1.32 times less risky than Anyang Iron. It trades about -0.12 of its potential returns per unit of risk. Anyang Iron Steel is currently generating about -0.13 per unit of risk. If you would invest  856.00  in China Sports Industry on October 8, 2024 and sell it today you would lose (80.00) from holding China Sports Industry or give up 9.35% of portfolio value over 90 days.

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

China Sports Industry  vs.  Anyang Iron Steel

China Sports Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Sports Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Anyang Iron Steel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Anyang Iron Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Anyang Iron is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Sports and Anyang Iron

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

The idea behind China Sports Industry and Anyang Iron Steel 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.

Check out your portfolio center.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.