Correlation Between Anhui Jianghuai and Qiaoyin Environmental

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

By analyzing existing cross correlation between Anhui Jianghuai Automobile and Qiaoyin Environmental Tech, you can compare the effects of market volatilities on Anhui Jianghuai and Qiaoyin Environmental 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 Jianghuai with a short position of Qiaoyin Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anhui Jianghuai and Qiaoyin Environmental.

Diversification Opportunities for Anhui Jianghuai and Qiaoyin Environmental

0.83

Correlation Coefficient

Anhui Jianghuai  Qiaoyin Environmental

Very poor diversification

The 3 months correlation between Anhui and Qiaoyin is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Jianghuai Automobile and Qiaoyin Environmental Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qiaoyin Environmental and Anhui Jianghuai 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 Jianghuai Automobile are associated (or correlated) with Qiaoyin Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qiaoyin Environmental has no effect on the direction of Anhui Jianghuai i.e., Anhui Jianghuai and Qiaoyin Environmental go up and down completely randomly.

Pair Corralation between Anhui Jianghuai and Qiaoyin Environmental

Assuming the 90 days trading horizon Anhui Jianghuai Automobile is expected to generate 1.3 times more return on investment than Qiaoyin Environmental. However, Anhui Jianghuai is 1.3 times more volatile than Qiaoyin Environmental Tech. It trades about 0.11 of its potential returns per unit of risk. Qiaoyin Environmental Tech is currently generating about 0.02 per unit of risk. If you would invest  1,718  in Anhui Jianghuai Automobile on September 13, 2024 and sell it today you would earn a total of  2,246  from holding Anhui Jianghuai Automobile or generate 130.73% return on investment over 90 days.

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

Anhui Jianghuai Automobile  vs.  Qiaoyin Environmental Tech

Anhui Jianghuai Auto

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Jianghuai Automobile are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Jianghuai sustained solid returns over the last few months and may actually be approaching a breakup point.

Qiaoyin Environmental

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Qiaoyin Environmental Tech are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qiaoyin Environmental sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anhui Jianghuai and Qiaoyin Environmental

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

The idea behind Anhui Jianghuai Automobile and Qiaoyin Environmental Tech 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.