Correlation Between Anji Foodstuff and Hua Xia

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

By analyzing existing cross correlation between Anji Foodstuff Co and Hua Xia Bank, you can compare the effects of market volatilities on Anji Foodstuff and Hua Xia 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 Anji Foodstuff with a short position of Hua Xia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anji Foodstuff and Hua Xia.

Diversification Opportunities for Anji Foodstuff and Hua Xia

0.79

Correlation Coefficient

Anji Foodstuff  Hua Xia

Poor diversification

The 3 months correlation between Anji and Hua is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Anji Foodstuff Co and Hua Xia Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hua Xia Bank and Anji Foodstuff 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 Anji Foodstuff Co are associated (or correlated) with Hua Xia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hua Xia Bank has no effect on the direction of Anji Foodstuff i.e., Anji Foodstuff and Hua Xia go up and down completely randomly.

Pair Corralation between Anji Foodstuff and Hua Xia

Assuming the 90 days trading horizon Anji Foodstuff Co is expected to generate 1.57 times more return on investment than Hua Xia. However, Anji Foodstuff is 1.57 times more volatile than Hua Xia Bank. It trades about 0.25 of its potential returns per unit of risk. Hua Xia Bank is currently generating about 0.18 per unit of risk. If you would invest  630.00  in Anji Foodstuff Co on September 16, 2024 and sell it today you would earn a total of  379.00  from holding Anji Foodstuff Co or generate 60.16% return on investment over 90 days.

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

Anji Foodstuff Co  vs.  Hua Xia Bank

Anji Foodstuff

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Anji Foodstuff Co are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anji Foodstuff sustained solid returns over the last few months and may actually be approaching a breakup point.

Hua Xia Bank

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Anji Foodstuff and Hua Xia

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

The idea behind Anji Foodstuff Co and Hua Xia Bank 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.