Correlation Between Anhui Conch and Fletcher Building

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

By analyzing existing cross correlation between Anhui Conch Cement and Fletcher Building Ltd, you can compare the effects of market volatilities on Anhui Conch and Fletcher Building 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 Conch with a short position of Fletcher Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anhui Conch and Fletcher Building.

Diversification Opportunities for Anhui Conch and Fletcher Building

-0.51

Correlation Coefficient

Anhui Conch  Fletcher Building

Excellent diversification

The 3 months correlation between Anhui and Fletcher is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Conch Cement and Fletcher Building Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fletcher Building and Anhui Conch 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 Conch Cement are associated (or correlated) with Fletcher Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fletcher Building has no effect on the direction of Anhui Conch i.e., Anhui Conch and Fletcher Building go up and down completely randomly.

Pair Corralation between Anhui Conch and Fletcher Building

Assuming the 90 days horizon Anhui Conch Cement is expected to generate 1.05 times more return on investment than Fletcher Building. However, Anhui Conch is 1.05 times more volatile than Fletcher Building Ltd. It trades about 0.12 of its potential returns per unit of risk. Fletcher Building Ltd is currently generating about -0.06 per unit of risk. If you would invest  211.00  in Anhui Conch Cement on September 15, 2024 and sell it today you would earn a total of  83.00  from holding Anhui Conch Cement or generate 39.34% return on investment over 90 days.

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

Anhui Conch Cement  vs.  Fletcher Building Ltd

Anhui Conch Cement

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Conch Cement are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical indicators, Anhui Conch reported solid returns over the last few months and may actually be approaching a breakup point.

Fletcher Building

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fletcher Building Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Anhui Conch and Fletcher Building

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

The idea behind Anhui Conch Cement and Fletcher Building Ltd 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.