Correlation Between Anhui Transport and Blue Sail

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

By analyzing existing cross correlation between Anhui Transport Consulting and Blue Sail Medical, you can compare the effects of market volatilities on Anhui Transport and Blue Sail 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 Transport with a short position of Blue Sail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anhui Transport and Blue Sail.

Diversification Opportunities for Anhui Transport and Blue Sail

0.94

Correlation Coefficient

Anhui Transport  Blue Sail

Almost no diversification

The 3 months correlation between Anhui and Blue is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Transport Consulting and Blue Sail Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Sail Medical and Anhui Transport 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 Transport Consulting are associated (or correlated) with Blue Sail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Sail Medical has no effect on the direction of Anhui Transport i.e., Anhui Transport and Blue Sail go up and down completely randomly.

Pair Corralation between Anhui Transport and Blue Sail

Assuming the 90 days trading horizon Anhui Transport Consulting is expected to generate 1.18 times more return on investment than Blue Sail. However, Anhui Transport is 1.18 times more volatile than Blue Sail Medical. It trades about -0.14 of its potential returns per unit of risk. Blue Sail Medical is currently generating about -0.22 per unit of risk. If you would invest  982.00  in Anhui Transport Consulting on October 1, 2024 and sell it today you would lose (58.00) from holding Anhui Transport Consulting or give up 5.91% of portfolio value over 90 days.

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

Anhui Transport Consulting  vs.  Blue Sail Medical

Anhui Transport Cons

Risk-Adjusted Performance

0 of 100

Very Weak

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

Blue Sail Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Sail Medical 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 Anhui Transport and Blue Sail

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

The idea behind Anhui Transport Consulting and Blue Sail Medical 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.