Correlation Between Agricultural Bank and Huaneng Lancang

Can any of the company-specific risk be diversified away by investing in both Agricultural Bank and Huaneng Lancang 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 Agricultural Bank and Huaneng Lancang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Agricultural Bank of and Huaneng Lancang River, you can compare the effects of market volatilities on Agricultural Bank and Huaneng Lancang 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 Agricultural Bank with a short position of Huaneng Lancang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agricultural Bank and Huaneng Lancang.

Diversification Opportunities for Agricultural Bank and Huaneng Lancang

-0.2

Correlation Coefficient

Agricultural Bank  Huaneng Lancang

Good diversification

The 3 months correlation between Agricultural and Huaneng is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Agricultural Bank of and Huaneng Lancang River in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaneng Lancang River and Agricultural Bank 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 Agricultural Bank of are associated (or correlated) with Huaneng Lancang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaneng Lancang River has no effect on the direction of Agricultural Bank i.e., Agricultural Bank and Huaneng Lancang go up and down completely randomly.

Pair Corralation between Agricultural Bank and Huaneng Lancang

Assuming the 90 days trading horizon Agricultural Bank of is expected to generate 1.0 times more return on investment than Huaneng Lancang. However, Agricultural Bank of is 1.0 times less risky than Huaneng Lancang. It trades about 0.11 of its potential returns per unit of risk. Huaneng Lancang River is currently generating about 0.07 per unit of risk. If you would invest  275.00  in Agricultural Bank of on September 26, 2024 and sell it today you would earn a total of  250.00  from holding Agricultural Bank of or generate 90.91% return on investment over 90 days.

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

Agricultural Bank of  vs.  Huaneng Lancang River

Agricultural Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Agricultural Bank of are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Agricultural Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Huaneng Lancang River

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huaneng Lancang River has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Agricultural Bank and Huaneng Lancang

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

The idea behind Agricultural Bank of and Huaneng Lancang River 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.