Correlation Between Yantai North and Anhui Tongguan

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

By analyzing existing cross correlation between Yantai North Andre and Anhui Tongguan Copper, you can compare the effects of market volatilities on Yantai North and Anhui Tongguan 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 Yantai North with a short position of Anhui Tongguan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yantai North and Anhui Tongguan.

Diversification Opportunities for Yantai North and Anhui Tongguan

0.46

Correlation Coefficient

Yantai North  Anhui Tongguan

Very weak diversification

The 3 months correlation between Yantai and Anhui is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Yantai North Andre and Anhui Tongguan Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Tongguan Copper and Yantai North 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 Yantai North Andre are associated (or correlated) with Anhui Tongguan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Tongguan Copper has no effect on the direction of Yantai North i.e., Yantai North and Anhui Tongguan go up and down completely randomly.

Pair Corralation between Yantai North and Anhui Tongguan

Assuming the 90 days trading horizon Yantai North Andre is expected to generate 0.63 times more return on investment than Anhui Tongguan. However, Yantai North Andre is 1.58 times less risky than Anhui Tongguan. It trades about 0.28 of its potential returns per unit of risk. Anhui Tongguan Copper is currently generating about -0.03 per unit of risk. If you would invest  2,812  in Yantai North Andre on December 30, 2024 and sell it today you would earn a total of  834.00  from holding Yantai North Andre or generate 29.66% return on investment over 90 days.

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

Yantai North Andre  vs.  Anhui Tongguan Copper

Yantai North Andre

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Yantai North Andre are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yantai North sustained solid returns over the last few months and may actually be approaching a breakup point.

Anhui Tongguan Copper

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Yantai North and Anhui Tongguan

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

The idea behind Yantai North Andre and Anhui Tongguan Copper 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.