Correlation Between Wangneng Environment and Hangzhou Gisway

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

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

Diversification Opportunities for Wangneng Environment and Hangzhou Gisway

0.75

Correlation Coefficient

Wangneng Environment  Hangzhou Gisway

Poor diversification

The 3 months correlation between Wangneng and Hangzhou is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Wangneng Environment Co and Hangzhou Gisway Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Gisway Info and Wangneng Environment 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 Wangneng Environment Co are associated (or correlated) with Hangzhou Gisway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Gisway Info has no effect on the direction of Wangneng Environment i.e., Wangneng Environment and Hangzhou Gisway go up and down completely randomly.

Pair Corralation between Wangneng Environment and Hangzhou Gisway

Assuming the 90 days trading horizon Wangneng Environment Co is expected to generate 0.47 times more return on investment than Hangzhou Gisway. However, Wangneng Environment Co is 2.13 times less risky than Hangzhou Gisway. It trades about 0.11 of its potential returns per unit of risk. Hangzhou Gisway Information is currently generating about 0.05 per unit of risk. If you would invest  1,244  in Wangneng Environment Co on October 4, 2024 and sell it today you would earn a total of  306.00  from holding Wangneng Environment Co or generate 24.6% return on investment over 90 days.

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

Wangneng Environment Co  vs.  Hangzhou Gisway Information

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.

Hangzhou Gisway Info

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Wangneng Environment and Hangzhou Gisway

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

The idea behind Wangneng Environment Co and Hangzhou Gisway Information 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.