Correlation Between De Grey and Anhui Expressway

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

By analyzing existing cross correlation between De Grey Mining and Anhui Expressway, you can compare the effects of market volatilities on De Grey and Anhui Expressway 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 De Grey with a short position of Anhui Expressway. Check out your portfolio center. Please also check ongoing floating volatility patterns of De Grey and Anhui Expressway.

Diversification Opportunities for De Grey and Anhui Expressway

0.03

Correlation Coefficient

De Grey  Anhui Expressway

Significant diversification

The 3 months correlation between DGD and Anhui is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding De Grey Mining and Anhui Expressway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Expressway and De Grey 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 De Grey Mining are associated (or correlated) with Anhui Expressway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Expressway has no effect on the direction of De Grey i.e., De Grey and Anhui Expressway go up and down completely randomly.

Pair Corralation between De Grey and Anhui Expressway

Assuming the 90 days trading horizon De Grey Mining is expected to generate 1.02 times more return on investment than Anhui Expressway. However, De Grey is 1.02 times more volatile than Anhui Expressway. It trades about 0.13 of its potential returns per unit of risk. Anhui Expressway is currently generating about -0.02 per unit of risk. If you would invest  102.00  in De Grey Mining on December 20, 2024 and sell it today you would earn a total of  18.00  from holding De Grey Mining or generate 17.65% return on investment over 90 days.

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

De Grey Mining  vs.  Anhui Expressway

De Grey Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in De Grey Mining are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, De Grey unveiled solid returns over the last few months and may actually be approaching a breakup point.

Anhui Expressway

Risk-Adjusted Performance

Weak

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

Pair Trading with De Grey and Anhui Expressway

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

The idea behind De Grey Mining and Anhui Expressway 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.