Correlation Between Shenyang Huitian and China Everbright

Can any of the company-specific risk be diversified away by investing in both Shenyang Huitian and China Everbright 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 Shenyang Huitian and China Everbright into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shenyang Huitian Thermal and China Everbright Bank, you can compare the effects of market volatilities on Shenyang Huitian and China Everbright 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 Shenyang Huitian with a short position of China Everbright. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenyang Huitian and China Everbright.

Diversification Opportunities for Shenyang Huitian and China Everbright

0.28

Correlation Coefficient

Shenyang Huitian  China Everbright

Modest diversification

The 3 months correlation between Shenyang and China is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Shenyang Huitian Thermal and China Everbright Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Everbright Bank and Shenyang Huitian 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 Shenyang Huitian Thermal are associated (or correlated) with China Everbright. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Everbright Bank has no effect on the direction of Shenyang Huitian i.e., Shenyang Huitian and China Everbright go up and down completely randomly.

Pair Corralation between Shenyang Huitian and China Everbright

Assuming the 90 days trading horizon Shenyang Huitian Thermal is expected to under-perform the China Everbright. In addition to that, Shenyang Huitian is 3.07 times more volatile than China Everbright Bank. It trades about -0.1 of its total potential returns per unit of risk. China Everbright Bank is currently generating about 0.0 per unit of volatility. If you would invest  375.00  in China Everbright Bank on October 11, 2024 and sell it today you would lose (1.00) from holding China Everbright Bank or give up 0.27% of portfolio value over 90 days.

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

Shenyang Huitian Thermal  vs.  China Everbright Bank

Shenyang Huitian Thermal

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenyang Huitian Thermal are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenyang Huitian sustained solid returns over the last few months and may actually be approaching a breakup point.

China Everbright Bank

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Everbright Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Everbright may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Shenyang Huitian and China Everbright

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

The idea behind Shenyang Huitian Thermal and China Everbright Bank 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.