Correlation Between Anhui Jianghuai and HeBei Jinniu

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

Diversification Opportunities for Anhui Jianghuai and HeBei Jinniu

-0.01

Correlation Coefficient

Anhui Jianghuai  HeBei Jinniu

Good diversification

The 3 months correlation between Anhui and HeBei is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Jianghuai Automobile and HeBei Jinniu Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HeBei Jinniu Chemical 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 HeBei Jinniu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HeBei Jinniu Chemical has no effect on the direction of Anhui Jianghuai i.e., Anhui Jianghuai and HeBei Jinniu go up and down completely randomly.

Pair Corralation between Anhui Jianghuai and HeBei Jinniu

Assuming the 90 days trading horizon Anhui Jianghuai Automobile is expected to generate 0.95 times more return on investment than HeBei Jinniu. However, Anhui Jianghuai Automobile is 1.06 times less risky than HeBei Jinniu. It trades about 0.0 of its potential returns per unit of risk. HeBei Jinniu Chemical is currently generating about -0.05 per unit of risk. If you would invest  3,485  in Anhui Jianghuai Automobile on December 3, 2024 and sell it today you would lose (105.00) from holding Anhui Jianghuai Automobile or give up 3.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Anhui Jianghuai Automobile  vs.  HeBei Jinniu Chemical

Anhui Jianghuai Auto

Risk-Adjusted Performance

Very Weak

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

HeBei Jinniu Chemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days HeBei Jinniu Chemical 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.

Pair Trading with Anhui Jianghuai and HeBei Jinniu

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

The idea behind Anhui Jianghuai Automobile and HeBei Jinniu Chemical 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 Commodity Directory module to find actively traded commodities issued by global exchanges.