Correlation Between Shenwu Energy and Winner Information

Can any of the company-specific risk be diversified away by investing in both Shenwu Energy and Winner Information 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 Winner Information 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 Winner Information Technology, you can compare the effects of market volatilities on Shenwu Energy and Winner Information 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 Winner Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenwu Energy and Winner Information.

Diversification Opportunities for Shenwu Energy and Winner Information

-0.1

Correlation Coefficient

Shenwu Energy  Winner Information

Good diversification

The 3 months correlation between Shenwu and Winner is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Shenwu Energy Saving and Winner Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Winner Information 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 Winner Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Winner Information has no effect on the direction of Shenwu Energy i.e., Shenwu Energy and Winner Information go up and down completely randomly.

Pair Corralation between Shenwu Energy and Winner Information

Assuming the 90 days trading horizon Shenwu Energy Saving is expected to under-perform the Winner Information. In addition to that, Shenwu Energy is 1.26 times more volatile than Winner Information Technology. It trades about -0.02 of its total potential returns per unit of risk. Winner Information Technology is currently generating about -0.02 per unit of volatility. If you would invest  3,005  in Winner Information Technology on December 24, 2024 and sell it today you would lose (236.00) from holding Winner Information Technology or give up 7.85% of portfolio value over 90 days.

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

Shenwu Energy Saving  vs.  Winner Information Technology

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 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.

Winner Information

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Shenwu Energy and Winner Information

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

The idea behind Shenwu Energy Saving and Winner Information Technology 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.