Correlation Between Anhui Transport and Gan Yuan

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

By analyzing existing cross correlation between Anhui Transport Consulting and Gan Yuan Foods, you can compare the effects of market volatilities on Anhui Transport and Gan Yuan 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 Transport with a short position of Gan Yuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anhui Transport and Gan Yuan.

Diversification Opportunities for Anhui Transport and Gan Yuan

0.74

Correlation Coefficient

Anhui Transport  Gan Yuan

Poor diversification

The 3 months correlation between Anhui and Gan is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Transport Consulting and Gan Yuan Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gan Yuan Foods and Anhui Transport 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 Transport Consulting are associated (or correlated) with Gan Yuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gan Yuan Foods has no effect on the direction of Anhui Transport i.e., Anhui Transport and Gan Yuan go up and down completely randomly.

Pair Corralation between Anhui Transport and Gan Yuan

Assuming the 90 days trading horizon Anhui Transport Consulting is expected to under-perform the Gan Yuan. But the stock apears to be less risky and, when comparing its historical volatility, Anhui Transport Consulting is 1.37 times less risky than Gan Yuan. The stock trades about -0.1 of its potential returns per unit of risk. The Gan Yuan Foods is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  7,462  in Gan Yuan Foods on September 27, 2024 and sell it today you would earn a total of  1,423  from holding Gan Yuan Foods or generate 19.07% return on investment over 90 days.

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

Anhui Transport Consulting  vs.  Gan Yuan Foods

Anhui Transport Cons

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Transport Consulting are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Transport may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Gan Yuan Foods

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gan Yuan Foods are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gan Yuan sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anhui Transport and Gan Yuan

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

The idea behind Anhui Transport Consulting and Gan Yuan Foods 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.