Correlation Between ACM Research and Anhui Huaheng

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

By analyzing existing cross correlation between ACM Research Shanghai and Anhui Huaheng Biotechnology, you can compare the effects of market volatilities on ACM Research and Anhui Huaheng 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 ACM Research with a short position of Anhui Huaheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of ACM Research and Anhui Huaheng.

Diversification Opportunities for ACM Research and Anhui Huaheng

0.71

Correlation Coefficient

ACM Research  Anhui Huaheng

Poor diversification

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

Pair Corralation between ACM Research and Anhui Huaheng

Assuming the 90 days trading horizon ACM Research Shanghai is expected to generate 0.75 times more return on investment than Anhui Huaheng. However, ACM Research Shanghai is 1.33 times less risky than Anhui Huaheng. It trades about -0.12 of its potential returns per unit of risk. Anhui Huaheng Biotechnology is currently generating about -0.15 per unit of risk. If you would invest  12,659  in ACM Research Shanghai on October 3, 2024 and sell it today you would lose (2,659) from holding ACM Research Shanghai or give up 21.0% of portfolio value over 90 days.

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

ACM Research Shanghai  vs.  Anhui Huaheng Biotechnology

ACM Research Shanghai

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ACM Research Shanghai has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Anhui Huaheng Biotec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anhui Huaheng Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ACM Research and Anhui Huaheng

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

The idea behind ACM Research Shanghai and Anhui Huaheng 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.