Correlation Between Shenwu Energy and Shandong Gold

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

Diversification Opportunities for Shenwu Energy and Shandong Gold

0.06

Correlation Coefficient

Shenwu Energy  Shandong Gold

Significant diversification

The 3 months correlation between Shenwu and Shandong is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Shenwu Energy Saving and Shandong Gold Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Gold Mining 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 Shandong Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Gold Mining has no effect on the direction of Shenwu Energy i.e., Shenwu Energy and Shandong Gold go up and down completely randomly.

Pair Corralation between Shenwu Energy and Shandong Gold

Assuming the 90 days trading horizon Shenwu Energy Saving is expected to generate 3.19 times more return on investment than Shandong Gold. However, Shenwu Energy is 3.19 times more volatile than Shandong Gold Mining. It trades about 0.06 of its potential returns per unit of risk. Shandong Gold Mining is currently generating about -0.2 per unit of risk. If you would invest  327.00  in Shenwu Energy Saving on October 23, 2024 and sell it today you would earn a total of  36.00  from holding Shenwu Energy Saving or generate 11.01% return on investment over 90 days.

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

Shenwu Energy Saving  vs.  Shandong Gold Mining

Shenwu Energy Saving

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenwu Energy Saving are ranked lower than 4 (%) 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.

Shandong Gold Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shandong Gold Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shenwu Energy and Shandong Gold

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

The idea behind Shenwu Energy Saving and Shandong Gold Mining 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.