Correlation Between Nanjing Medlander and Anhui Jianghuai

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

By analyzing existing cross correlation between Nanjing Medlander Medical and Anhui Jianghuai Automobile, you can compare the effects of market volatilities on Nanjing Medlander and Anhui Jianghuai 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 Nanjing Medlander with a short position of Anhui Jianghuai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nanjing Medlander and Anhui Jianghuai.

Diversification Opportunities for Nanjing Medlander and Anhui Jianghuai

0.79

Correlation Coefficient

Nanjing Medlander  Anhui Jianghuai

Poor diversification

The 3 months correlation between Nanjing and Anhui is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Nanjing Medlander Medical and Anhui Jianghuai Automobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Jianghuai Auto and Nanjing Medlander 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 Nanjing Medlander Medical are associated (or correlated) with Anhui Jianghuai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Jianghuai Auto has no effect on the direction of Nanjing Medlander i.e., Nanjing Medlander and Anhui Jianghuai go up and down completely randomly.

Pair Corralation between Nanjing Medlander and Anhui Jianghuai

Assuming the 90 days trading horizon Nanjing Medlander Medical is expected to under-perform the Anhui Jianghuai. But the stock apears to be less risky and, when comparing its historical volatility, Nanjing Medlander Medical is 1.65 times less risky than Anhui Jianghuai. The stock trades about -0.1 of its potential returns per unit of risk. The Anhui Jianghuai Automobile is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  3,891  in Anhui Jianghuai Automobile on September 25, 2024 and sell it today you would lose (133.00) from holding Anhui Jianghuai Automobile or give up 3.42% of portfolio value over 90 days.

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

Nanjing Medlander Medical  vs.  Anhui Jianghuai Automobile

Nanjing Medlander Medical

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nanjing Medlander Medical are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanjing Medlander sustained solid returns over the last few months and may actually be approaching a breakup point.

Anhui Jianghuai Auto

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Jianghuai Automobile are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Jianghuai sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nanjing Medlander and Anhui Jianghuai

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

The idea behind Nanjing Medlander Medical and Anhui Jianghuai Automobile 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.