Correlation Between Industrial and Anhui Gujing

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

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

Diversification Opportunities for Industrial and Anhui Gujing

0.72

Correlation Coefficient

Industrial  Anhui Gujing

Poor diversification

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

Pair Corralation between Industrial and Anhui Gujing

Assuming the 90 days trading horizon Industrial is expected to generate 2.05 times less return on investment than Anhui Gujing. But when comparing it to its historical volatility, Industrial and Commercial is 2.59 times less risky than Anhui Gujing. It trades about 0.18 of its potential returns per unit of risk. Anhui Gujing Distillery is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  14,650  in Anhui Gujing Distillery on September 12, 2024 and sell it today you would earn a total of  4,600  from holding Anhui Gujing Distillery or generate 31.4% return on investment over 90 days.

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

Industrial and Commercial  vs.  Anhui Gujing Distillery

Industrial and Commercial

Risk-Adjusted Performance

14 of 100

Good

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

Anhui Gujing Distillery

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Gujing Distillery are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Gujing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial and Anhui Gujing

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

The idea behind Industrial and Commercial and Anhui Gujing Distillery 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.