Correlation Between Anhui Xinhua and Simei Media

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

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

Diversification Opportunities for Anhui Xinhua and Simei Media

0.42

Correlation Coefficient

Anhui Xinhua  Simei Media

Very weak diversification

The 3 months correlation between Anhui and Simei is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Xinhua Media and Simei Media Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simei Media and Anhui Xinhua 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 Anhui Xinhua Media are associated (or correlated) with Simei Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simei Media has no effect on the direction of Anhui Xinhua i.e., Anhui Xinhua and Simei Media go up and down completely randomly.

Pair Corralation between Anhui Xinhua and Simei Media

Assuming the 90 days trading horizon Anhui Xinhua Media is expected to under-perform the Simei Media. But the stock apears to be less risky and, when comparing its historical volatility, Anhui Xinhua Media is 2.01 times less risky than Simei Media. The stock trades about -0.04 of its potential returns per unit of risk. The Simei Media Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  459.00  in Simei Media Co on October 22, 2024 and sell it today you would earn a total of  105.00  from holding Simei Media Co or generate 22.88% return on investment over 90 days.

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

Anhui Xinhua Media  vs.  Simei Media Co

Anhui Xinhua Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anhui Xinhua Media 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.

Simei Media

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Simei Media Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Simei Media sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anhui Xinhua and Simei Media

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

The idea behind Anhui Xinhua Media and Simei Media Co 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.