Correlation Between Changjiang Publishing and Anhui Transport

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

By analyzing existing cross correlation between Changjiang Publishing Media and Anhui Transport Consulting, you can compare the effects of market volatilities on Changjiang Publishing and Anhui Transport 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 Changjiang Publishing with a short position of Anhui Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changjiang Publishing and Anhui Transport.

Diversification Opportunities for Changjiang Publishing and Anhui Transport

0.29

Correlation Coefficient

Changjiang Publishing  Anhui Transport

Modest diversification

The 3 months correlation between Changjiang and Anhui is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Changjiang Publishing Media and Anhui Transport Consulting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Transport Cons and Changjiang Publishing 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 Changjiang Publishing Media are associated (or correlated) with Anhui Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Transport Cons has no effect on the direction of Changjiang Publishing i.e., Changjiang Publishing and Anhui Transport go up and down completely randomly.

Pair Corralation between Changjiang Publishing and Anhui Transport

Assuming the 90 days trading horizon Changjiang Publishing Media is expected to generate 1.16 times more return on investment than Anhui Transport. However, Changjiang Publishing is 1.16 times more volatile than Anhui Transport Consulting. It trades about 0.02 of its potential returns per unit of risk. Anhui Transport Consulting is currently generating about -0.1 per unit of risk. If you would invest  896.00  in Changjiang Publishing Media on September 21, 2024 and sell it today you would earn a total of  6.00  from holding Changjiang Publishing Media or generate 0.67% return on investment over 90 days.

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

Changjiang Publishing Media  vs.  Anhui Transport Consulting

Changjiang Publishing

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Changjiang Publishing Media are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changjiang Publishing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Anhui Transport Cons

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Transport Consulting are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Transport sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Changjiang Publishing and Anhui Transport

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

The idea behind Changjiang Publishing Media and Anhui Transport Consulting 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.