Correlation Between Anderson Industrial and China Electric

Can any of the company-specific risk be diversified away by investing in both Anderson Industrial and China Electric 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 Anderson Industrial and China Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Anderson Industrial Corp and China Electric Manufacturing, you can compare the effects of market volatilities on Anderson Industrial and China Electric 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 Anderson Industrial with a short position of China Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anderson Industrial and China Electric.

Diversification Opportunities for Anderson Industrial and China Electric

-0.46

Correlation Coefficient

Anderson Industrial  China Electric

Very good diversification

The 3 months correlation between Anderson and China is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Anderson Industrial Corp and China Electric Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Electric Manuf and Anderson Industrial 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 Anderson Industrial Corp are associated (or correlated) with China Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Electric Manuf has no effect on the direction of Anderson Industrial i.e., Anderson Industrial and China Electric go up and down completely randomly.

Pair Corralation between Anderson Industrial and China Electric

Assuming the 90 days trading horizon Anderson Industrial Corp is expected to generate 2.14 times more return on investment than China Electric. However, Anderson Industrial is 2.14 times more volatile than China Electric Manufacturing. It trades about 0.13 of its potential returns per unit of risk. China Electric Manufacturing is currently generating about 0.02 per unit of risk. If you would invest  1,345  in Anderson Industrial Corp on September 4, 2024 and sell it today you would earn a total of  440.00  from holding Anderson Industrial Corp or generate 32.71% return on investment over 90 days.

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

Anderson Industrial Corp  vs.  China Electric Manufacturing

Anderson Industrial Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anderson Industrial Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Anderson Industrial showed solid returns over the last few months and may actually be approaching a breakup point.

China Electric Manuf

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Electric Manufacturing are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, China Electric is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Anderson Industrial and China Electric

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

The idea behind Anderson Industrial Corp and China Electric Manufacturing 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..