Correlation Between Jinhui Liquor and Anhui Transport

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

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

Diversification Opportunities for Jinhui Liquor and Anhui Transport

0.97

Correlation Coefficient

Jinhui Liquor  Anhui Transport

Almost no diversification

The 3 months correlation between Jinhui and Anhui is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Jinhui Liquor Co and Anhui Transport Consulting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Transport Cons and Jinhui Liquor 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 Jinhui Liquor Co are associated (or correlated) with Anhui Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Transport Cons has no effect on the direction of Jinhui Liquor i.e., Jinhui Liquor and Anhui Transport go up and down completely randomly.

Pair Corralation between Jinhui Liquor and Anhui Transport

Assuming the 90 days trading horizon Jinhui Liquor Co is expected to generate 1.36 times more return on investment than Anhui Transport. However, Jinhui Liquor is 1.36 times more volatile than Anhui Transport Consulting. It trades about 0.13 of its potential returns per unit of risk. Anhui Transport Consulting is currently generating about 0.15 per unit of risk. If you would invest  1,690  in Jinhui Liquor Co on September 5, 2024 and sell it today you would earn a total of  439.00  from holding Jinhui Liquor Co or generate 25.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.28%
Values	Daily Returns

Jinhui Liquor Co  vs.  Anhui Transport Consulting

Jinhui Liquor

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jinhui Liquor Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jinhui Liquor sustained solid returns over the last few months and may actually be approaching a breakup point.

Anhui Transport Cons

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Jinhui Liquor and Anhui Transport

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

The idea behind Jinhui Liquor Co and Anhui Transport Consulting 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.