Correlation Between Anhui Transport and Aofu Environmental

Can any of the company-specific risk be diversified away by investing in both Anhui Transport and Aofu Environmental 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 Aofu Environmental 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 Aofu Environmental Technology, you can compare the effects of market volatilities on Anhui Transport and Aofu Environmental 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 Aofu Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anhui Transport and Aofu Environmental.

Diversification Opportunities for Anhui Transport and Aofu Environmental

0.95

Correlation Coefficient

Anhui Transport  Aofu Environmental

Almost no diversification

The 3 months correlation between Anhui and Aofu is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Transport Consulting and Aofu Environmental Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aofu Environmental 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 Aofu Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aofu Environmental has no effect on the direction of Anhui Transport i.e., Anhui Transport and Aofu Environmental go up and down completely randomly.

Pair Corralation between Anhui Transport and Aofu Environmental

Assuming the 90 days trading horizon Anhui Transport is expected to generate 14.0 times less return on investment than Aofu Environmental. But when comparing it to its historical volatility, Anhui Transport Consulting is 1.43 times less risky than Aofu Environmental. It trades about 0.01 of its potential returns per unit of risk. Aofu Environmental Technology is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,010  in Aofu Environmental Technology on September 30, 2024 and sell it today you would earn a total of  72.00  from holding Aofu Environmental Technology or generate 7.13% return on investment over 90 days.

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

Anhui Transport Consulting  vs.  Aofu Environmental Technology

Anhui Transport Cons

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aofu Environmental

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Anhui Transport and Aofu Environmental

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

The idea behind Anhui Transport Consulting and Aofu Environmental Technology 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.