Correlation Between Aofu Environmental and Chenzhou Jingui

Can any of the company-specific risk be diversified away by investing in both Aofu Environmental and Chenzhou Jingui 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 Aofu Environmental and Chenzhou Jingui into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aofu Environmental Technology and Chenzhou Jingui Silver, you can compare the effects of market volatilities on Aofu Environmental and Chenzhou Jingui 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 Aofu Environmental with a short position of Chenzhou Jingui. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aofu Environmental and Chenzhou Jingui.

Diversification Opportunities for Aofu Environmental and Chenzhou Jingui

0.76

Correlation Coefficient

Aofu Environmental  Chenzhou Jingui

Poor diversification

The 3 months correlation between Aofu and Chenzhou is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Aofu Environmental Technology and Chenzhou Jingui Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chenzhou Jingui Silver and Aofu Environmental 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 Aofu Environmental Technology are associated (or correlated) with Chenzhou Jingui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chenzhou Jingui Silver has no effect on the direction of Aofu Environmental i.e., Aofu Environmental and Chenzhou Jingui go up and down completely randomly.

Pair Corralation between Aofu Environmental and Chenzhou Jingui

Assuming the 90 days trading horizon Aofu Environmental Technology is expected to under-perform the Chenzhou Jingui. In addition to that, Aofu Environmental is 1.24 times more volatile than Chenzhou Jingui Silver. It trades about -0.02 of its total potential returns per unit of risk. Chenzhou Jingui Silver is currently generating about -0.02 per unit of volatility. If you would invest  364.00  in Chenzhou Jingui Silver on November 29, 2024 and sell it today you would lose (12.00) from holding Chenzhou Jingui Silver or give up 3.3% of portfolio value over 90 days.

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

Aofu Environmental Technology  vs.  Chenzhou Jingui Silver

Aofu Environmental

Risk-Adjusted Performance

Very Weak

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

Chenzhou Jingui Silver

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Aofu Environmental and Chenzhou Jingui

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

The idea behind Aofu Environmental Technology and Chenzhou Jingui Silver 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..