Correlation Between Anhui Estone and Tibet Huayu

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

Diversification Opportunities for Anhui Estone and Tibet Huayu

0.59

Correlation Coefficient

Anhui Estone  Tibet Huayu

Very weak diversification

The 3 months correlation between Anhui and Tibet is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Estone Materials and Tibet Huayu Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tibet Huayu Mining 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 Tibet Huayu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tibet Huayu Mining has no effect on the direction of Anhui Estone i.e., Anhui Estone and Tibet Huayu go up and down completely randomly.

Pair Corralation between Anhui Estone and Tibet Huayu

Assuming the 90 days trading horizon Anhui Estone Materials is expected to under-perform the Tibet Huayu. In addition to that, Anhui Estone is 2.22 times more volatile than Tibet Huayu Mining. It trades about -0.24 of its total potential returns per unit of risk. Tibet Huayu Mining is currently generating about -0.44 per unit of volatility. If you would invest  1,484  in Tibet Huayu Mining on October 11, 2024 and sell it today you would lose (247.00) from holding Tibet Huayu Mining or give up 16.64% of portfolio value over 90 days.

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

Anhui Estone Materials  vs.  Tibet Huayu Mining

Anhui Estone Materials

Risk-Adjusted Performance

6 of 100

Modest

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

Tibet Huayu Mining

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tibet Huayu Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tibet Huayu may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Anhui Estone and Tibet Huayu

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

The idea behind Anhui Estone Materials and Tibet Huayu Mining 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.

Check out your portfolio center.

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.