Correlation Between Anhui Estone and Qingdao Choho

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

By analyzing existing cross correlation between Anhui Estone Materials and Qingdao Choho Industrial, you can compare the effects of market volatilities on Anhui Estone and Qingdao Choho 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 Estone with a short position of Qingdao Choho. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anhui Estone and Qingdao Choho.

Diversification Opportunities for Anhui Estone and Qingdao Choho

0.13

Correlation Coefficient

Anhui Estone  Qingdao Choho

Average diversification

The 3 months correlation between Anhui and Qingdao is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Estone Materials and Qingdao Choho Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingdao Choho Industrial and Anhui Estone 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 Estone Materials are associated (or correlated) with Qingdao Choho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qingdao Choho Industrial has no effect on the direction of Anhui Estone i.e., Anhui Estone and Qingdao Choho go up and down completely randomly.

Pair Corralation between Anhui Estone and Qingdao Choho

Assuming the 90 days trading horizon Anhui Estone Materials is expected to under-perform the Qingdao Choho. But the stock apears to be less risky and, when comparing its historical volatility, Anhui Estone Materials is 1.6 times less risky than Qingdao Choho. The stock trades about -0.11 of its potential returns per unit of risk. The Qingdao Choho Industrial is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  2,673  in Qingdao Choho Industrial on December 25, 2024 and sell it today you would earn a total of  2,734  from holding Qingdao Choho Industrial or generate 102.28% return on investment over 90 days.

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

Anhui Estone Materials  vs.  Qingdao Choho Industrial

Anhui Estone Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Anhui Estone Materials 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Qingdao Choho Industrial

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Qingdao Choho Industrial are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qingdao Choho sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anhui Estone and Qingdao Choho

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

The idea behind Anhui Estone Materials and Qingdao Choho Industrial 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.