Correlation Between Anyang Iron and Guangdong Tianhe

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

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

Diversification Opportunities for Anyang Iron and Guangdong Tianhe

0.68

Correlation Coefficient

Anyang Iron  Guangdong Tianhe

Poor diversification

The 3 months correlation between Anyang and Guangdong is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Anyang Iron Steel and Guangdong Tianhe Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Tianhe Agr and Anyang Iron 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 Anyang Iron Steel are associated (or correlated) with Guangdong Tianhe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Tianhe Agr has no effect on the direction of Anyang Iron i.e., Anyang Iron and Guangdong Tianhe go up and down completely randomly.

Pair Corralation between Anyang Iron and Guangdong Tianhe

Assuming the 90 days trading horizon Anyang Iron is expected to generate 2.79 times less return on investment than Guangdong Tianhe. In addition to that, Anyang Iron is 1.16 times more volatile than Guangdong Tianhe Agricultural. It trades about 0.01 of its total potential returns per unit of risk. Guangdong Tianhe Agricultural is currently generating about 0.05 per unit of volatility. If you would invest  602.00  in Guangdong Tianhe Agricultural on December 26, 2024 and sell it today you would earn a total of  23.00  from holding Guangdong Tianhe Agricultural or generate 3.82% return on investment over 90 days.

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

Anyang Iron Steel  vs.  Guangdong Tianhe Agricultural

Anyang Iron Steel

Risk-Adjusted Performance

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.

Guangdong Tianhe Agr

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Tianhe Agricultural are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Guangdong Tianhe is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Anyang Iron and Guangdong Tianhe

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

The idea behind Anyang Iron Steel and Guangdong Tianhe Agricultural 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..