Correlation Between Central Plains and Sieyuan Electric

Can any of the company-specific risk be diversified away by investing in both Central Plains and Sieyuan Electric 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 Central Plains and Sieyuan Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Central Plains Environment and Sieyuan Electric Co, you can compare the effects of market volatilities on Central Plains and Sieyuan Electric 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 Central Plains with a short position of Sieyuan Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Plains and Sieyuan Electric.

Diversification Opportunities for Central Plains and Sieyuan Electric

0.6

Correlation Coefficient

Central Plains  Sieyuan Electric

Poor diversification

The 3 months correlation between Central and Sieyuan is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Central Plains Environment and Sieyuan Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sieyuan Electric and Central Plains 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 Central Plains Environment are associated (or correlated) with Sieyuan Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sieyuan Electric has no effect on the direction of Central Plains i.e., Central Plains and Sieyuan Electric go up and down completely randomly.

Pair Corralation between Central Plains and Sieyuan Electric

Assuming the 90 days trading horizon Central Plains Environment is expected to generate 0.76 times more return on investment than Sieyuan Electric. However, Central Plains Environment is 1.31 times less risky than Sieyuan Electric. It trades about -0.12 of its potential returns per unit of risk. Sieyuan Electric Co is currently generating about -0.18 per unit of risk. If you would invest  880.00  in Central Plains Environment on October 5, 2024 and sell it today you would lose (30.00) from holding Central Plains Environment or give up 3.41% of portfolio value over 90 days.

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

Central Plains Environment  vs.  Sieyuan Electric Co

Central Plains Envir

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sieyuan Electric

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Central Plains and Sieyuan Electric

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

The idea behind Central Plains Environment and Sieyuan Electric Co 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.