Correlation Between Anhui Transport and Shanghai Rendu

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

Diversification Opportunities for Anhui Transport and Shanghai Rendu

0.86

Correlation Coefficient

Anhui Transport  Shanghai Rendu

Very poor diversification

The 3 months correlation between Anhui and Shanghai is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Transport Consulting and Shanghai Rendu Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Rendu Biote 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 Shanghai Rendu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Rendu Biote has no effect on the direction of Anhui Transport i.e., Anhui Transport and Shanghai Rendu go up and down completely randomly.

Pair Corralation between Anhui Transport and Shanghai Rendu

Assuming the 90 days trading horizon Anhui Transport Consulting is expected to under-perform the Shanghai Rendu. But the stock apears to be less risky and, when comparing its historical volatility, Anhui Transport Consulting is 2.1 times less risky than Shanghai Rendu. The stock trades about -0.04 of its potential returns per unit of risk. The Shanghai Rendu Biotechnology is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,710  in Shanghai Rendu Biotechnology on September 27, 2024 and sell it today you would lose (97.00) from holding Shanghai Rendu Biotechnology or give up 2.61% of portfolio value over 90 days.

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

Anhui Transport Consulting  vs.  Shanghai Rendu Biotechnology

Anhui Transport Cons

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Transport Consulting are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Transport may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Shanghai Rendu Biote

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Rendu Biotechnology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Rendu sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anhui Transport and Shanghai Rendu

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

The idea behind Anhui Transport Consulting and Shanghai Rendu Biotechnology 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.