Correlation Between Mingchen Health and Shenwu Energy

Can any of the company-specific risk be diversified away by investing in both Mingchen Health and Shenwu Energy 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 Mingchen Health and Shenwu Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mingchen Health Co and Shenwu Energy Saving, you can compare the effects of market volatilities on Mingchen Health and Shenwu Energy 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 Mingchen Health with a short position of Shenwu Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mingchen Health and Shenwu Energy.

Diversification Opportunities for Mingchen Health and Shenwu Energy

0.07

Correlation Coefficient

Mingchen Health  Shenwu Energy

Significant diversification

The 3 months correlation between Mingchen and Shenwu is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Mingchen Health Co and Shenwu Energy Saving in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenwu Energy Saving and Mingchen Health 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 Mingchen Health Co are associated (or correlated) with Shenwu Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenwu Energy Saving has no effect on the direction of Mingchen Health i.e., Mingchen Health and Shenwu Energy go up and down completely randomly.

Pair Corralation between Mingchen Health and Shenwu Energy

Assuming the 90 days trading horizon Mingchen Health is expected to generate 3.65 times less return on investment than Shenwu Energy. But when comparing it to its historical volatility, Mingchen Health Co is 1.67 times less risky than Shenwu Energy. It trades about 0.05 of its potential returns per unit of risk. Shenwu Energy Saving is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  331.00  in Shenwu Energy Saving on October 26, 2024 and sell it today you would earn a total of  34.00  from holding Shenwu Energy Saving or generate 10.27% return on investment over 90 days.

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

Mingchen Health Co  vs.  Shenwu Energy Saving

Mingchen Health

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mingchen Health Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mingchen Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenwu Energy Saving

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenwu Energy Saving has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Mingchen Health and Shenwu Energy

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

The idea behind Mingchen Health Co and Shenwu Energy Saving 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.