Correlation Between Rongan Property and Shengyuan Environmental

Can any of the company-specific risk be diversified away by investing in both Rongan Property and Shengyuan Environmental 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 Shengyuan Environmental 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 Shengyuan Environmental Protection, you can compare the effects of market volatilities on Rongan Property and Shengyuan Environmental 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 Shengyuan Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rongan Property and Shengyuan Environmental.

Diversification Opportunities for Rongan Property and Shengyuan Environmental

0.83

Correlation Coefficient

Rongan Property  Shengyuan Environmental

Very poor diversification

The 3 months correlation between Rongan and Shengyuan is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Rongan Property Co and Shengyuan Environmental Protec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shengyuan Environmental 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 Shengyuan Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shengyuan Environmental has no effect on the direction of Rongan Property i.e., Rongan Property and Shengyuan Environmental go up and down completely randomly.

Pair Corralation between Rongan Property and Shengyuan Environmental

Assuming the 90 days trading horizon Rongan Property Co is expected to generate 1.41 times more return on investment than Shengyuan Environmental. However, Rongan Property is 1.41 times more volatile than Shengyuan Environmental Protection. It trades about -0.04 of its potential returns per unit of risk. Shengyuan Environmental Protection is currently generating about -0.06 per unit of risk. If you would invest  237.00  in Rongan Property Co on October 24, 2024 and sell it today you would lose (19.00) from holding Rongan Property Co or give up 8.02% 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.  Shengyuan Environmental Protec

Rongan Property

Risk-Adjusted Performance

0 of 100

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 somewhat strong basic indicators, Rongan Property is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shengyuan Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shengyuan Environmental Protection 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.

Pair Trading with Rongan Property and Shengyuan Environmental

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

The idea behind Rongan Property Co and Shengyuan Environmental Protection 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.