Correlation Between Shenwu Energy and Kweichow Moutai

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

Diversification Opportunities for Shenwu Energy and Kweichow Moutai

0.39

Correlation Coefficient

Shenwu Energy  Kweichow Moutai

Weak diversification

The 3 months correlation between Shenwu and Kweichow is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Shenwu Energy Saving and Kweichow Moutai Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kweichow Moutai 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 Kweichow Moutai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kweichow Moutai has no effect on the direction of Shenwu Energy i.e., Shenwu Energy and Kweichow Moutai go up and down completely randomly.

Pair Corralation between Shenwu Energy and Kweichow Moutai

Assuming the 90 days trading horizon Shenwu Energy Saving is expected to generate 5.9 times more return on investment than Kweichow Moutai. However, Shenwu Energy is 5.9 times more volatile than Kweichow Moutai Co. It trades about 0.01 of its potential returns per unit of risk. Kweichow Moutai Co is currently generating about -0.21 per unit of risk. If you would invest  391.00  in Shenwu Energy Saving on October 21, 2024 and sell it today you would lose (7.00) from holding Shenwu Energy Saving or give up 1.79% of portfolio value over 90 days.

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

Shenwu Energy Saving  vs.  Kweichow Moutai Co

Shenwu Energy Saving

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shenwu Energy Saving are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenwu Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Kweichow Moutai

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kweichow Moutai Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Kweichow Moutai 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 Kweichow Moutai

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

The idea behind Shenwu Energy Saving and Kweichow Moutai 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.