Correlation Between Shanghai CEO and Anhui Huaren

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

By analyzing existing cross correlation between Shanghai CEO Environmental and Anhui Huaren Health, you can compare the effects of market volatilities on Shanghai CEO and Anhui Huaren 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 Shanghai CEO with a short position of Anhui Huaren. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai CEO and Anhui Huaren.

Diversification Opportunities for Shanghai CEO and Anhui Huaren

0.92

Correlation Coefficient

Shanghai CEO  Anhui Huaren

Almost no diversification

The 3 months correlation between Shanghai and Anhui is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai CEO Environmental and Anhui Huaren Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Huaren Health and Shanghai CEO 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 Shanghai CEO Environmental are associated (or correlated) with Anhui Huaren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Huaren Health has no effect on the direction of Shanghai CEO i.e., Shanghai CEO and Anhui Huaren go up and down completely randomly.

Pair Corralation between Shanghai CEO and Anhui Huaren

Assuming the 90 days trading horizon Shanghai CEO is expected to generate 1.28 times less return on investment than Anhui Huaren. But when comparing it to its historical volatility, Shanghai CEO Environmental is 1.25 times less risky than Anhui Huaren. It trades about 0.08 of its potential returns per unit of risk. Anhui Huaren Health is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,001  in Anhui Huaren Health on September 25, 2024 and sell it today you would earn a total of  151.00  from holding Anhui Huaren Health or generate 15.08% return on investment over 90 days.

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

Shanghai CEO Environmental  vs.  Anhui Huaren Health

Shanghai CEO Environ

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai CEO Environmental are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai CEO sustained solid returns over the last few months and may actually be approaching a breakup point.

Anhui Huaren Health

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Huaren Health are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Huaren sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shanghai CEO and Anhui Huaren

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

The idea behind Shanghai CEO Environmental and Anhui Huaren Health 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.