Correlation Between Anhui Deli and Tongyu Communication

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

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

Diversification Opportunities for Anhui Deli and Tongyu Communication

0.72

Correlation Coefficient

Anhui Deli  Tongyu Communication

Poor diversification

The 3 months correlation between Anhui and Tongyu is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Deli Household and Tongyu Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tongyu Communication and Anhui Deli 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 Deli Household are associated (or correlated) with Tongyu Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tongyu Communication has no effect on the direction of Anhui Deli i.e., Anhui Deli and Tongyu Communication go up and down completely randomly.

Pair Corralation between Anhui Deli and Tongyu Communication

Assuming the 90 days trading horizon Anhui Deli Household is expected to under-perform the Tongyu Communication. In addition to that, Anhui Deli is 1.86 times more volatile than Tongyu Communication. It trades about -0.24 of its total potential returns per unit of risk. Tongyu Communication is currently generating about -0.38 per unit of volatility. If you would invest  1,710  in Tongyu Communication on September 27, 2024 and sell it today you would lose (217.00) from holding Tongyu Communication or give up 12.69% of portfolio value over 90 days.

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

Anhui Deli Household  vs.  Tongyu Communication

Anhui Deli Household

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anhui Deli Household has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Anhui Deli is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tongyu Communication

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tongyu Communication are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tongyu Communication sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anhui Deli and Tongyu Communication

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

The idea behind Anhui Deli Household and Tongyu Communication 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.