Correlation Between Anhui Conch and Guangdong Investment

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

By analyzing existing cross correlation between Anhui Conch Cement and Guangdong Investment Limited, you can compare the effects of market volatilities on Anhui Conch and Guangdong Investment 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 Conch with a short position of Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anhui Conch and Guangdong Investment.

Diversification Opportunities for Anhui Conch and Guangdong Investment

-0.35

Correlation Coefficient

Anhui Conch  Guangdong Investment

Very good diversification

The 3 months correlation between Anhui and Guangdong is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Conch Cement and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment and Anhui Conch 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 Conch Cement are associated (or correlated) with Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of Anhui Conch i.e., Anhui Conch and Guangdong Investment go up and down completely randomly.

Pair Corralation between Anhui Conch and Guangdong Investment

Assuming the 90 days horizon Anhui Conch Cement is expected to generate 1.3 times more return on investment than Guangdong Investment. However, Anhui Conch is 1.3 times more volatile than Guangdong Investment Limited. It trades about 0.1 of its potential returns per unit of risk. Guangdong Investment Limited is currently generating about -0.01 per unit of risk. If you would invest  1,258  in Anhui Conch Cement on December 30, 2024 and sell it today you would earn a total of  169.00  from holding Anhui Conch Cement or generate 13.43% return on investment over 90 days.

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

Anhui Conch Cement  vs.  Guangdong Investment Limited

Anhui Conch Cement

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Conch Cement are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical indicators, Anhui Conch showed solid returns over the last few months and may actually be approaching a breakup point.

Guangdong Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangdong Investment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Guangdong Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Anhui Conch and Guangdong Investment

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

The idea behind Anhui Conch Cement and Guangdong Investment Limited 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.