Correlation Between Elite Color and Penyao Environmental

Can any of the company-specific risk be diversified away by investing in both Elite Color and Penyao Environmental 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 Elite Color and Penyao Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Elite Color Environmental and Penyao Environmental Protection, you can compare the effects of market volatilities on Elite Color and Penyao Environmental 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 Elite Color with a short position of Penyao Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Color and Penyao Environmental.

Diversification Opportunities for Elite Color and Penyao Environmental

0.23

Correlation Coefficient

Elite Color  Penyao Environmental

Modest diversification

The 3 months correlation between Elite and Penyao is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Elite Color Environmental and Penyao Environmental Protectio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penyao Environmental and Elite Color 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 Elite Color Environmental are associated (or correlated) with Penyao Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penyao Environmental has no effect on the direction of Elite Color i.e., Elite Color and Penyao Environmental go up and down completely randomly.

Pair Corralation between Elite Color and Penyao Environmental

Assuming the 90 days trading horizon Elite Color Environmental is expected to generate 0.84 times more return on investment than Penyao Environmental. However, Elite Color Environmental is 1.18 times less risky than Penyao Environmental. It trades about 0.07 of its potential returns per unit of risk. Penyao Environmental Protection is currently generating about -0.06 per unit of risk. If you would invest  621.00  in Elite Color Environmental on December 24, 2024 and sell it today you would earn a total of  41.00  from holding Elite Color Environmental or generate 6.6% return on investment over 90 days.

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

Elite Color Environmental  vs.  Penyao Environmental Protectio

Elite Color Environmental

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elite Color Environmental are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Elite Color may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Penyao Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Penyao Environmental Protection 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 Elite Color and Penyao Environmental

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

The idea behind Elite Color Environmental and Penyao Environmental Protection 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.