Correlation Between Hubei Geoway and Anhui Deli

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

By analyzing existing cross correlation between Hubei Geoway Investment and Anhui Deli Household, you can compare the effects of market volatilities on Hubei Geoway and Anhui Deli 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 Hubei Geoway with a short position of Anhui Deli. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hubei Geoway and Anhui Deli.

Diversification Opportunities for Hubei Geoway and Anhui Deli

0.45

Correlation Coefficient

Hubei Geoway  Anhui Deli

Very weak diversification

The 3 months correlation between Hubei and Anhui is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Geoway Investment and Anhui Deli Household in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Deli Household and Hubei Geoway 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 Hubei Geoway Investment are associated (or correlated) with Anhui Deli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Deli Household has no effect on the direction of Hubei Geoway i.e., Hubei Geoway and Anhui Deli go up and down completely randomly.

Pair Corralation between Hubei Geoway and Anhui Deli

Assuming the 90 days trading horizon Hubei Geoway Investment is expected to generate 0.89 times more return on investment than Anhui Deli. However, Hubei Geoway Investment is 1.12 times less risky than Anhui Deli. It trades about -0.01 of its potential returns per unit of risk. Anhui Deli Household is currently generating about -0.01 per unit of risk. If you would invest  202.00  in Hubei Geoway Investment on September 26, 2024 and sell it today you would lose (44.00) from holding Hubei Geoway Investment or give up 21.78% of portfolio value over 90 days.

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

Hubei Geoway Investment  vs.  Anhui Deli Household

Hubei Geoway Investment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hubei Geoway Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hubei Geoway sustained solid returns over the last few months and may actually be approaching a breakup point.

Anhui Deli Household

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Hubei Geoway and Anhui Deli

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

The idea behind Hubei Geoway Investment and Anhui Deli Household 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.