Correlation Between Anhui Xinhua and Tibet Huayu

Can any of the company-specific risk be diversified away by investing in both Anhui Xinhua and Tibet Huayu 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 Tibet Huayu 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 Tibet Huayu Mining, you can compare the effects of market volatilities on Anhui Xinhua and Tibet Huayu 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 Tibet Huayu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anhui Xinhua and Tibet Huayu.

Diversification Opportunities for Anhui Xinhua and Tibet Huayu

0.41

Correlation Coefficient

Anhui Xinhua  Tibet Huayu

Very weak diversification

The 3 months correlation between Anhui and Tibet is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Xinhua Media and Tibet Huayu Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tibet Huayu Mining 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 Tibet Huayu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tibet Huayu Mining has no effect on the direction of Anhui Xinhua i.e., Anhui Xinhua and Tibet Huayu go up and down completely randomly.

Pair Corralation between Anhui Xinhua and Tibet Huayu

Assuming the 90 days trading horizon Anhui Xinhua is expected to generate 3.31 times less return on investment than Tibet Huayu. But when comparing it to its historical volatility, Anhui Xinhua Media is 1.24 times less risky than Tibet Huayu. It trades about 0.01 of its potential returns per unit of risk. Tibet Huayu Mining is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  978.00  in Tibet Huayu Mining on October 4, 2024 and sell it today you would earn a total of  253.00  from holding Tibet Huayu Mining or generate 25.87% 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.  Tibet Huayu Mining

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 somewhat strong basic indicators, Anhui Xinhua is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tibet Huayu Mining

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Anhui Xinhua and Tibet Huayu

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

The idea behind Anhui Xinhua Media and Tibet Huayu Mining 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.