Correlation Between Anhui Huaheng and Mengtian Home

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

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

Diversification Opportunities for Anhui Huaheng and Mengtian Home

0.68

Correlation Coefficient

Anhui Huaheng  Mengtian Home

Poor diversification

The 3 months correlation between Anhui and Mengtian is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Huaheng Biotechnology and Mengtian Home Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mengtian Home Group and Anhui Huaheng 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 Anhui Huaheng Biotechnology are associated (or correlated) with Mengtian Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mengtian Home Group has no effect on the direction of Anhui Huaheng i.e., Anhui Huaheng and Mengtian Home go up and down completely randomly.

Pair Corralation between Anhui Huaheng and Mengtian Home

Assuming the 90 days trading horizon Anhui Huaheng Biotechnology is expected to under-perform the Mengtian Home. In addition to that, Anhui Huaheng is 1.35 times more volatile than Mengtian Home Group. It trades about -0.05 of its total potential returns per unit of risk. Mengtian Home Group is currently generating about 0.07 per unit of volatility. If you would invest  1,101  in Mengtian Home Group on December 26, 2024 and sell it today you would earn a total of  76.00  from holding Mengtian Home Group or generate 6.9% return on investment over 90 days.

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

Anhui Huaheng Biotechnology  vs.  Mengtian Home Group

Anhui Huaheng Biotec

Risk-Adjusted Performance

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Mengtian Home Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mengtian Home Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mengtian Home may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Anhui Huaheng and Mengtian Home

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

The idea behind Anhui Huaheng Biotechnology and Mengtian Home Group 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.