Correlation Between Anhui Jianghuai and Shanghai Rendu

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

Diversification Opportunities for Anhui Jianghuai and Shanghai Rendu

0.43

Correlation Coefficient

Anhui Jianghuai  Shanghai Rendu

Very weak diversification

The 3 months correlation between Anhui and Shanghai is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Jianghuai Automobile and Shanghai Rendu Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Rendu Biote 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 Shanghai Rendu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Rendu Biote has no effect on the direction of Anhui Jianghuai i.e., Anhui Jianghuai and Shanghai Rendu go up and down completely randomly.

Pair Corralation between Anhui Jianghuai and Shanghai Rendu

Assuming the 90 days trading horizon Anhui Jianghuai Automobile is expected to generate 0.93 times more return on investment than Shanghai Rendu. However, Anhui Jianghuai Automobile is 1.08 times less risky than Shanghai Rendu. It trades about 0.08 of its potential returns per unit of risk. Shanghai Rendu Biotechnology is currently generating about 0.04 per unit of risk. If you would invest  3,463  in Anhui Jianghuai Automobile on October 24, 2024 and sell it today you would earn a total of  543.00  from holding Anhui Jianghuai Automobile or generate 15.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Anhui Jianghuai Automobile  vs.  Shanghai Rendu Biotechnology

Anhui Jianghuai Auto

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Jianghuai Automobile are ranked lower than 6 (%) 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.

Shanghai Rendu Biote

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Rendu Biotechnology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Rendu may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Anhui Jianghuai and Shanghai Rendu

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

The idea behind Anhui Jianghuai Automobile and Shanghai Rendu Biotechnology 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.