Correlation Between Shenwu Energy and Shenzhen Centralcon

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

Diversification Opportunities for Shenwu Energy and Shenzhen Centralcon

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Shenwu and Shenzhen is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Shenwu Energy Saving and Shenzhen Centralcon Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Centralcon and Shenwu Energy 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 Shenwu Energy Saving are associated (or correlated) with Shenzhen Centralcon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Centralcon has no effect on the direction of Shenwu Energy i.e., Shenwu Energy and Shenzhen Centralcon go up and down completely randomly.

Pair Corralation between Shenwu Energy and Shenzhen Centralcon

Assuming the 90 days trading horizon Shenwu Energy Saving is expected to generate 1.08 times more return on investment than Shenzhen Centralcon. However, Shenwu Energy is 1.08 times more volatile than Shenzhen Centralcon Investment. It trades about 0.01 of its potential returns per unit of risk. Shenzhen Centralcon Investment is currently generating about -0.02 per unit of risk. If you would invest  369.00  in Shenwu Energy Saving on October 4, 2024 and sell it today you would lose (20.00) from holding Shenwu Energy Saving or give up 5.42% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Shenwu Energy Saving  vs.  Shenzhen Centralcon Investment

 Performance 
       Timeline  
Shenwu Energy Saving 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Shenwu Energy Saving are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenwu Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Shenzhen Centralcon 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Shenzhen Centralcon Investment 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.

Shenwu Energy and Shenzhen Centralcon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shenwu Energy and Shenzhen Centralcon

The main advantage of trading using opposite Shenwu Energy and Shenzhen Centralcon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenwu Energy position performs unexpectedly, Shenzhen Centralcon 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 Shenzhen Centralcon will offset losses from the drop in Shenzhen Centralcon's long position.
The idea behind Shenwu Energy Saving and Shenzhen Centralcon Investment 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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