Correlation Between Guangdong Investment and Anhui Conch

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

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

Diversification Opportunities for Guangdong Investment and Anhui Conch

-0.04

Correlation Coefficient

Guangdong Investment  Anhui Conch

Good diversification

The 3 months correlation between Guangdong and Anhui is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment and Anhui Conch Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Conch Cement and Guangdong Investment 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 Guangdong Investment are associated (or correlated) with Anhui Conch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Conch Cement has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and Anhui Conch go up and down completely randomly.

Pair Corralation between Guangdong Investment and Anhui Conch

Assuming the 90 days horizon Guangdong Investment is expected to generate 1.43 times more return on investment than Anhui Conch. However, Guangdong Investment is 1.43 times more volatile than Anhui Conch Cement. It trades about 0.09 of its potential returns per unit of risk. Anhui Conch Cement is currently generating about -0.02 per unit of risk. If you would invest  3,100  in Guangdong Investment on November 28, 2024 and sell it today you would earn a total of  455.00  from holding Guangdong Investment or generate 14.68% return on investment over 90 days.

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

Guangdong Investment  vs.  Anhui Conch Cement

Guangdong Investment

Risk-Adjusted Performance

OK

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

Anhui Conch Cement

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Guangdong Investment and Anhui Conch

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

The idea behind Guangdong Investment and Anhui Conch Cement 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.