Correlation Between Huitong Construction and Anhui Huilong

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

Diversification Opportunities for Huitong Construction and Anhui Huilong

0.79
  Correlation Coefficient

Poor diversification

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

Pair Corralation between Huitong Construction and Anhui Huilong

Assuming the 90 days trading horizon Huitong Construction Group is expected to generate 1.14 times more return on investment than Anhui Huilong. However, Huitong Construction is 1.14 times more volatile than Anhui Huilong Agricultural. It trades about -0.02 of its potential returns per unit of risk. Anhui Huilong Agricultural is currently generating about -0.02 per unit of risk. If you would invest  733.00  in Huitong Construction Group on November 27, 2024 and sell it today you would lose (224.00) from holding Huitong Construction Group or give up 30.56% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Huitong Construction Group  vs.  Anhui Huilong Agricultural

 Performance 
       Timeline  
Huitong Construction 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Huitong Construction Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Huitong Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Anhui Huilong Agricu 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Anhui Huilong Agricultural has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Huitong Construction and Anhui Huilong Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Huitong Construction and Anhui Huilong

The main advantage of trading using opposite Huitong Construction and Anhui Huilong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huitong Construction position performs unexpectedly, Anhui Huilong 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 Huilong will offset losses from the drop in Anhui Huilong's long position.
The idea behind Huitong Construction Group and Anhui Huilong Agricultural 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.

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