Correlation Between CGN Nuclear and Wangneng Environment

Can any of the company-specific risk be diversified away by investing in both CGN Nuclear and Wangneng Environment 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 CGN Nuclear and Wangneng Environment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CGN Nuclear Technology and Wangneng Environment Co, you can compare the effects of market volatilities on CGN Nuclear and Wangneng Environment 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 CGN Nuclear with a short position of Wangneng Environment. Check out your portfolio center. Please also check ongoing floating volatility patterns of CGN Nuclear and Wangneng Environment.

Diversification Opportunities for CGN Nuclear and Wangneng Environment

0.71

Correlation Coefficient

CGN Nuclear  Wangneng Environment

Poor diversification

The 3 months correlation between CGN and Wangneng is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding CGN Nuclear Technology and Wangneng Environment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wangneng Environment and CGN Nuclear 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 CGN Nuclear Technology are associated (or correlated) with Wangneng Environment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wangneng Environment has no effect on the direction of CGN Nuclear i.e., CGN Nuclear and Wangneng Environment go up and down completely randomly.

Pair Corralation between CGN Nuclear and Wangneng Environment

Assuming the 90 days trading horizon CGN Nuclear Technology is expected to generate 1.51 times more return on investment than Wangneng Environment. However, CGN Nuclear is 1.51 times more volatile than Wangneng Environment Co. It trades about 0.0 of its potential returns per unit of risk. Wangneng Environment Co is currently generating about -0.05 per unit of risk. If you would invest  726.00  in CGN Nuclear Technology on October 25, 2024 and sell it today you would lose (8.00) from holding CGN Nuclear Technology or give up 1.1% of portfolio value over 90 days.

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

CGN Nuclear Technology  vs.  Wangneng Environment Co

CGN Nuclear Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CGN Nuclear Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CGN Nuclear is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wangneng Environment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wangneng Environment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Wangneng Environment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CGN Nuclear and Wangneng Environment

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

The idea behind CGN Nuclear Technology and Wangneng Environment 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.