Correlation Between Guangdong Silvere and Anhui Huaertai

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Can any of the company-specific risk be diversified away by investing in both Guangdong Silvere and Anhui Huaertai 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 Guangdong Silvere and Anhui Huaertai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guangdong Silvere Sci and Anhui Huaertai Chemical, you can compare the effects of market volatilities on Guangdong Silvere and Anhui Huaertai 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 Guangdong Silvere with a short position of Anhui Huaertai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Silvere and Anhui Huaertai.

Diversification Opportunities for Guangdong Silvere and Anhui Huaertai

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Guangdong and Anhui is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Silvere Sci and Anhui Huaertai Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Huaertai Chemical and Guangdong Silvere 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 Guangdong Silvere Sci are associated (or correlated) with Anhui Huaertai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Huaertai Chemical has no effect on the direction of Guangdong Silvere i.e., Guangdong Silvere and Anhui Huaertai go up and down completely randomly.

Pair Corralation between Guangdong Silvere and Anhui Huaertai

Assuming the 90 days trading horizon Guangdong Silvere is expected to generate 8.17 times less return on investment than Anhui Huaertai. In addition to that, Guangdong Silvere is 1.54 times more volatile than Anhui Huaertai Chemical. It trades about 0.01 of its total potential returns per unit of risk. Anhui Huaertai Chemical is currently generating about 0.07 per unit of volatility. If you would invest  1,075  in Anhui Huaertai Chemical on September 5, 2024 and sell it today you would earn a total of  78.00  from holding Anhui Huaertai Chemical or generate 7.26% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Guangdong Silvere Sci  vs.  Anhui Huaertai Chemical

 Performance 
       Timeline  
Guangdong Silvere Sci 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Silvere Sci are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Silvere sustained solid returns over the last few months and may actually be approaching a breakup point.
Anhui Huaertai Chemical 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Huaertai Chemical are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Huaertai sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangdong Silvere and Anhui Huaertai Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Guangdong Silvere and Anhui Huaertai

The main advantage of trading using opposite Guangdong Silvere and Anhui Huaertai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Silvere position performs unexpectedly, Anhui Huaertai 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 Huaertai will offset losses from the drop in Anhui Huaertai's long position.
The idea behind Guangdong Silvere Sci and Anhui Huaertai Chemical 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.

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