Correlation Between King-Strong New and Anhui Deli

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

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

Diversification Opportunities for King-Strong New and Anhui Deli

0.93

Correlation Coefficient

King-Strong New  Anhui Deli

Almost no diversification

The 3 months correlation between King-Strong and Anhui is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding King Strong New Material and Anhui Deli Household in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Deli Household and King-Strong New 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 King Strong New Material are associated (or correlated) with Anhui Deli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Deli Household has no effect on the direction of King-Strong New i.e., King-Strong New and Anhui Deli go up and down completely randomly.

Pair Corralation between King-Strong New and Anhui Deli

Assuming the 90 days trading horizon King Strong New Material is expected to generate 1.36 times more return on investment than Anhui Deli. However, King-Strong New is 1.36 times more volatile than Anhui Deli Household. It trades about 0.19 of its potential returns per unit of risk. Anhui Deli Household is currently generating about 0.13 per unit of risk. If you would invest  1,543  in King Strong New Material on August 31, 2024 and sell it today you would earn a total of  806.00  from holding King Strong New Material or generate 52.24% return on investment over 90 days.

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

King Strong New Material  vs.  Anhui Deli Household

King Strong New

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in King Strong New Material are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, King-Strong New sustained solid returns over the last few months and may actually be approaching a breakup point.

Anhui Deli Household

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Deli Household are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Deli sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with King-Strong New and Anhui Deli

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

The idea behind King Strong New Material and Anhui Deli Household 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.