Correlation Between Anhui Conch and West China

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

Diversification Opportunities for Anhui Conch and West China

0.68

Correlation Coefficient

Anhui Conch  West China

Poor diversification

The 3 months correlation between Anhui and West is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Conch Cement and West China Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West China Cement 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 West China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West China Cement has no effect on the direction of Anhui Conch i.e., Anhui Conch and West China go up and down completely randomly.

Pair Corralation between Anhui Conch and West China

Assuming the 90 days horizon Anhui Conch is expected to generate 1.04 times less return on investment than West China. In addition to that, Anhui Conch is 1.05 times more volatile than West China Cement. It trades about 0.11 of its total potential returns per unit of risk. West China Cement is currently generating about 0.13 per unit of volatility. If you would invest  15.00  in West China Cement on September 5, 2024 and sell it today you would earn a total of  4.00  from holding West China Cement or generate 26.67% return on investment over 90 days.

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

Anhui Conch Cement  vs.  West China Cement

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. In spite of fairly weak technical indicators, Anhui Conch showed solid returns over the last few months and may actually be approaching a breakup point.

West China Cement

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Anhui Conch and West China

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

The idea behind Anhui Conch Cement and West China Cement 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.