Correlation Between Shenwu Energy and GRIPM Advanced

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

Diversification Opportunities for Shenwu Energy and GRIPM Advanced

0.66

Correlation Coefficient

Shenwu Energy  GRIPM Advanced

Poor diversification

The 3 months correlation between Shenwu and GRIPM is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Shenwu Energy Saving and GRIPM Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GRIPM Advanced Materials 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 GRIPM Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GRIPM Advanced Materials has no effect on the direction of Shenwu Energy i.e., Shenwu Energy and GRIPM Advanced go up and down completely randomly.

Pair Corralation between Shenwu Energy and GRIPM Advanced

Assuming the 90 days trading horizon Shenwu Energy Saving is expected to under-perform the GRIPM Advanced. In addition to that, Shenwu Energy is 1.22 times more volatile than GRIPM Advanced Materials. It trades about -0.14 of its total potential returns per unit of risk. GRIPM Advanced Materials is currently generating about 0.13 per unit of volatility. If you would invest  3,141  in GRIPM Advanced Materials on September 27, 2024 and sell it today you would earn a total of  236.00  from holding GRIPM Advanced Materials or generate 7.51% return on investment over 90 days.

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

Shenwu Energy Saving  vs.  GRIPM Advanced Materials

Shenwu Energy Saving

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shenwu Energy Saving are ranked lower than 5 (%) 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.

GRIPM Advanced Materials

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GRIPM Advanced Materials are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GRIPM Advanced sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenwu Energy and GRIPM Advanced

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

The idea behind Shenwu Energy Saving and GRIPM Advanced Materials 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.