Correlation Between Shenwu Energy and Gemdale Corp

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

Diversification Opportunities for Shenwu Energy and Gemdale Corp

-0.45

Correlation Coefficient

Shenwu Energy  Gemdale Corp

Very good diversification

The 3 months correlation between Shenwu and Gemdale is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Shenwu Energy Saving and Gemdale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gemdale Corp 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 Gemdale Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gemdale Corp has no effect on the direction of Shenwu Energy i.e., Shenwu Energy and Gemdale Corp go up and down completely randomly.

Pair Corralation between Shenwu Energy and Gemdale Corp

Assuming the 90 days trading horizon Shenwu Energy Saving is expected to under-perform the Gemdale Corp. In addition to that, Shenwu Energy is 1.99 times more volatile than Gemdale Corp. It trades about -0.03 of its total potential returns per unit of risk. Gemdale Corp is currently generating about 0.01 per unit of volatility. If you would invest  455.00  in Gemdale Corp on December 26, 2024 and sell it today you would earn a total of  1.00  from holding Gemdale Corp or generate 0.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Shenwu Energy Saving  vs.  Gemdale Corp

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.

Gemdale Corp

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gemdale Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Gemdale Corp 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 Gemdale Corp

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

The idea behind Shenwu Energy Saving and Gemdale Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.