Correlation Between Anhui Transport and Guilin Seamild

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

Diversification Opportunities for Anhui Transport and Guilin Seamild

0.62

Correlation Coefficient

Anhui Transport  Guilin Seamild

Poor diversification

The 3 months correlation between Anhui and Guilin is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Transport Consulting and Guilin Seamild Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guilin Seamild Foods 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 Guilin Seamild. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guilin Seamild Foods has no effect on the direction of Anhui Transport i.e., Anhui Transport and Guilin Seamild go up and down completely randomly.

Pair Corralation between Anhui Transport and Guilin Seamild

Assuming the 90 days trading horizon Anhui Transport Consulting is expected to generate 1.13 times more return on investment than Guilin Seamild. However, Anhui Transport is 1.13 times more volatile than Guilin Seamild Foods. It trades about 0.03 of its potential returns per unit of risk. Guilin Seamild Foods is currently generating about 0.03 per unit of risk. If you would invest  736.00  in Anhui Transport Consulting on September 28, 2024 and sell it today you would earn a total of  175.00  from holding Anhui Transport Consulting or generate 23.78% return on investment over 90 days.

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

Anhui Transport Consulting  vs.  Guilin Seamild Foods

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.

Guilin Seamild Foods

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guilin Seamild Foods are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guilin Seamild sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anhui Transport and Guilin Seamild

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

The idea behind Anhui Transport Consulting and Guilin Seamild Foods 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.