Correlation Between Sunny Loan and Anhui Gujing

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

By analyzing existing cross correlation between Sunny Loan Top and Anhui Gujing Distillery, you can compare the effects of market volatilities on Sunny Loan and Anhui Gujing 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 Sunny Loan with a short position of Anhui Gujing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunny Loan and Anhui Gujing.

Diversification Opportunities for Sunny Loan and Anhui Gujing

0.76

Correlation Coefficient

Sunny Loan  Anhui Gujing

Poor diversification

The 3 months correlation between Sunny and Anhui is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Loan Top and Anhui Gujing Distillery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Gujing Distillery and Sunny Loan 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 Sunny Loan Top are associated (or correlated) with Anhui Gujing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Gujing Distillery has no effect on the direction of Sunny Loan i.e., Sunny Loan and Anhui Gujing go up and down completely randomly.

Pair Corralation between Sunny Loan and Anhui Gujing

Assuming the 90 days trading horizon Sunny Loan Top is expected to generate 1.19 times more return on investment than Anhui Gujing. However, Sunny Loan is 1.19 times more volatile than Anhui Gujing Distillery. It trades about -0.02 of its potential returns per unit of risk. Anhui Gujing Distillery is currently generating about -0.07 per unit of risk. If you would invest  1,174  in Sunny Loan Top on September 28, 2024 and sell it today you would lose (112.00) from holding Sunny Loan Top or give up 9.54% of portfolio value over 90 days.

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

Sunny Loan Top  vs.  Anhui Gujing Distillery

Sunny Loan Top

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunny Loan Top has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sunny Loan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Anhui Gujing Distillery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anhui Gujing Distillery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sunny Loan and Anhui Gujing

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

The idea behind Sunny Loan Top and Anhui Gujing Distillery 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.