Correlation Between Shenwu Energy and Agricultural Bank

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

Diversification Opportunities for Shenwu Energy and Agricultural Bank

0.45

Correlation Coefficient

Shenwu Energy  Agricultural Bank

Very weak diversification

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

Pair Corralation between Shenwu Energy and Agricultural Bank

Assuming the 90 days trading horizon Shenwu Energy is expected to generate 1.81 times less return on investment than Agricultural Bank. In addition to that, Shenwu Energy is 2.9 times more volatile than Agricultural Bank of. It trades about 0.05 of its total potential returns per unit of risk. Agricultural Bank of is currently generating about 0.28 per unit of volatility. If you would invest  480.00  in Agricultural Bank of on September 19, 2024 and sell it today you would earn a total of  30.00  from holding Agricultural Bank of or generate 6.25% return on investment over 90 days.

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

Shenwu Energy Saving  vs.  Agricultural Bank of

Shenwu Energy Saving

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shenwu Energy Saving are ranked lower than 16 (%) 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.

Agricultural Bank

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Agricultural Bank of are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Agricultural Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenwu Energy and Agricultural Bank

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

The idea behind Shenwu Energy Saving and Agricultural Bank of 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.