Correlation Between Anhui Conch and James Hardie

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

Diversification Opportunities for Anhui Conch and James Hardie

-0.31

Correlation Coefficient

Anhui Conch  James Hardie

Very good diversification

The 3 months correlation between Anhui and James is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Conch Cement and James Hardie Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on James Hardie Industries 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 James Hardie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of James Hardie Industries has no effect on the direction of Anhui Conch i.e., Anhui Conch and James Hardie go up and down completely randomly.

Pair Corralation between Anhui Conch and James Hardie

Assuming the 90 days horizon Anhui Conch is expected to generate 160.2 times less return on investment than James Hardie. But when comparing it to its historical volatility, Anhui Conch Cement is 1.02 times less risky than James Hardie. It trades about 0.0 of its potential returns per unit of risk. James Hardie Industries is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,792  in James Hardie Industries on September 13, 2024 and sell it today you would earn a total of  1,628  from holding James Hardie Industries or generate 90.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Anhui Conch Cement  vs.  James Hardie Industries

Anhui Conch Cement

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Conch Cement are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical indicators, Anhui Conch showed solid returns over the last few months and may actually be approaching a breakup point.

James Hardie Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days James Hardie Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, James Hardie is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Anhui Conch and James Hardie

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

The idea behind Anhui Conch Cement and James Hardie Industries 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.