Correlation Between Anhui Huaheng and Yindu Kitchen

Can any of the company-specific risk be diversified away by investing in both Anhui Huaheng and Yindu Kitchen 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 Yindu Kitchen 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 Yindu Kitchen Equipment, you can compare the effects of market volatilities on Anhui Huaheng and Yindu Kitchen 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 Yindu Kitchen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anhui Huaheng and Yindu Kitchen.

Diversification Opportunities for Anhui Huaheng and Yindu Kitchen

0.05

Correlation Coefficient

Anhui Huaheng  Yindu Kitchen

Significant diversification

The 3 months correlation between Anhui and Yindu is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Huaheng Biotechnology and Yindu Kitchen Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yindu Kitchen Equipment 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 Yindu Kitchen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yindu Kitchen Equipment has no effect on the direction of Anhui Huaheng i.e., Anhui Huaheng and Yindu Kitchen go up and down completely randomly.

Pair Corralation between Anhui Huaheng and Yindu Kitchen

Assuming the 90 days trading horizon Anhui Huaheng Biotechnology is expected to under-perform the Yindu Kitchen. But the stock apears to be less risky and, when comparing its historical volatility, Anhui Huaheng Biotechnology is 1.24 times less risky than Yindu Kitchen. The stock trades about -0.49 of its potential returns per unit of risk. The Yindu Kitchen Equipment is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  2,390  in Yindu Kitchen Equipment on October 22, 2024 and sell it today you would earn a total of  356.00  from holding Yindu Kitchen Equipment or generate 14.9% return on investment over 90 days.

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

Anhui Huaheng Biotechnology  vs.  Yindu Kitchen Equipment

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.

Yindu Kitchen Equipment

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yindu Kitchen Equipment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yindu Kitchen may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Anhui Huaheng and Yindu Kitchen

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

The idea behind Anhui Huaheng Biotechnology and Yindu Kitchen Equipment 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.