Correlation Between Rongan Property and Shenwu Energy

Can any of the company-specific risk be diversified away by investing in both Rongan Property and Shenwu Energy 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 Rongan Property and Shenwu Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rongan Property Co and Shenwu Energy Saving, you can compare the effects of market volatilities on Rongan Property and Shenwu Energy 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 Rongan Property with a short position of Shenwu Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rongan Property and Shenwu Energy.

Diversification Opportunities for Rongan Property and Shenwu Energy

0.82

Correlation Coefficient

Rongan Property  Shenwu Energy

Very poor diversification

The 3 months correlation between Rongan and Shenwu is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Rongan Property Co and Shenwu Energy Saving in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenwu Energy Saving and Rongan Property 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 Rongan Property Co are associated (or correlated) with Shenwu Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenwu Energy Saving has no effect on the direction of Rongan Property i.e., Rongan Property and Shenwu Energy go up and down completely randomly.

Pair Corralation between Rongan Property and Shenwu Energy

Assuming the 90 days trading horizon Rongan Property Co is expected to under-perform the Shenwu Energy. But the stock apears to be less risky and, when comparing its historical volatility, Rongan Property Co is 2.16 times less risky than Shenwu Energy. The stock trades about -0.13 of its potential returns per unit of risk. The Shenwu Energy Saving is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  331.00  in Shenwu Energy Saving on December 25, 2024 and sell it today you would lose (11.00) from holding Shenwu Energy Saving or give up 3.32% of portfolio value over 90 days.

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

Rongan Property Co  vs.  Shenwu Energy Saving

Rongan Property

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rongan Property Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Shenwu Energy Saving

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenwu Energy Saving has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shenwu Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rongan Property and Shenwu Energy

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

The idea behind Rongan Property Co and Shenwu Energy Saving 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.