Correlation Between Panda Financial and Anhui Fuhuang

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

By analyzing existing cross correlation between Panda Financial Holding and Anhui Fuhuang Steel, you can compare the effects of market volatilities on Panda Financial and Anhui Fuhuang 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 Panda Financial with a short position of Anhui Fuhuang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Panda Financial and Anhui Fuhuang.

Diversification Opportunities for Panda Financial and Anhui Fuhuang

0.82

Correlation Coefficient

Panda Financial  Anhui Fuhuang

Very poor diversification

The 3 months correlation between Panda and Anhui is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Panda Financial Holding and Anhui Fuhuang Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Fuhuang Steel and Panda Financial 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 Panda Financial Holding are associated (or correlated) with Anhui Fuhuang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Fuhuang Steel has no effect on the direction of Panda Financial i.e., Panda Financial and Anhui Fuhuang go up and down completely randomly.

Pair Corralation between Panda Financial and Anhui Fuhuang

Assuming the 90 days trading horizon Panda Financial Holding is expected to generate 0.72 times more return on investment than Anhui Fuhuang. However, Panda Financial Holding is 1.39 times less risky than Anhui Fuhuang. It trades about -0.17 of its potential returns per unit of risk. Anhui Fuhuang Steel is currently generating about -0.27 per unit of risk. If you would invest  1,520  in Panda Financial Holding on October 9, 2024 and sell it today you would lose (230.00) from holding Panda Financial Holding or give up 15.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.0%
Values	Daily Returns

Panda Financial Holding  vs.  Anhui Fuhuang Steel

Panda Financial Holding

Risk-Adjusted Performance

5 of 100

Modest

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

Anhui Fuhuang Steel

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Fuhuang Steel are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Fuhuang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Panda Financial and Anhui Fuhuang

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

The idea behind Panda Financial Holding and Anhui Fuhuang Steel 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.