Correlation Between Tibet Huayu and Anhui Estone

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

By analyzing existing cross correlation between Tibet Huayu Mining and Anhui Estone Materials, you can compare the effects of market volatilities on Tibet Huayu and Anhui Estone 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 Tibet Huayu with a short position of Anhui Estone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tibet Huayu and Anhui Estone.

Diversification Opportunities for Tibet Huayu and Anhui Estone

-0.08

Correlation Coefficient

Tibet Huayu  Anhui Estone

Good diversification

The 3 months correlation between Tibet and Anhui is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Tibet Huayu Mining and Anhui Estone Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Estone Materials and Tibet Huayu 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 Tibet Huayu Mining are associated (or correlated) with Anhui Estone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Estone Materials has no effect on the direction of Tibet Huayu i.e., Tibet Huayu and Anhui Estone go up and down completely randomly.

Pair Corralation between Tibet Huayu and Anhui Estone

Assuming the 90 days trading horizon Tibet Huayu Mining is expected to generate 1.14 times more return on investment than Anhui Estone. However, Tibet Huayu is 1.14 times more volatile than Anhui Estone Materials. It trades about 0.35 of its potential returns per unit of risk. Anhui Estone Materials is currently generating about -0.09 per unit of risk. If you would invest  1,328  in Tibet Huayu Mining on December 23, 2024 and sell it today you would earn a total of  1,227  from holding Tibet Huayu Mining or generate 92.39% return on investment over 90 days.

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

Tibet Huayu Mining  vs.  Anhui Estone Materials

Tibet Huayu Mining

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Tibet Huayu Mining are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tibet Huayu sustained solid returns over the last few months and may actually be approaching a breakup point.

Anhui Estone Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Anhui Estone Materials 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Tibet Huayu and Anhui Estone

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

The idea behind Tibet Huayu Mining and Anhui Estone Materials 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.