Correlation Between Anhui Transport and Nanning Chemical

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

Diversification Opportunities for Anhui Transport and Nanning Chemical

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Anhui and Nanning is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Transport Consulting and Nanning Chemical Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanning Chemical Industry 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 Nanning Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanning Chemical Industry has no effect on the direction of Anhui Transport i.e., Anhui Transport and Nanning Chemical go up and down completely randomly.

Pair Corralation between Anhui Transport and Nanning Chemical

Assuming the 90 days trading horizon Anhui Transport Consulting is expected to under-perform the Nanning Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Anhui Transport Consulting is 1.61 times less risky than Nanning Chemical. The stock trades about -0.23 of its potential returns per unit of risk. The Nanning Chemical Industry is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,784  in Nanning Chemical Industry on October 25, 2024 and sell it today you would lose (15.00) from holding Nanning Chemical Industry or give up 0.84% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Anhui Transport Consulting  vs.  Nanning Chemical Industry

 Performance 
       Timeline  
Anhui Transport Cons 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 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.
Nanning Chemical Industry 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Nanning Chemical Industry are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nanning Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Anhui Transport and Nanning Chemical Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Anhui Transport and Nanning Chemical

The main advantage of trading using opposite Anhui Transport and Nanning Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anhui Transport position performs unexpectedly, Nanning Chemical 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 Nanning Chemical will offset losses from the drop in Nanning Chemical's long position.
The idea behind Anhui Transport Consulting and Nanning Chemical Industry 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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