Correlation Between Penghua Shenzhen and Dalian Zeus

Can any of the company-specific risk be diversified away by investing in both Penghua Shenzhen and Dalian Zeus 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 Penghua Shenzhen and Dalian Zeus into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Penghua Shenzhen Energy and Dalian Zeus Entertainment, you can compare the effects of market volatilities on Penghua Shenzhen and Dalian Zeus 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 Penghua Shenzhen with a short position of Dalian Zeus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penghua Shenzhen and Dalian Zeus.

Diversification Opportunities for Penghua Shenzhen and Dalian Zeus

-0.15

Correlation Coefficient

Penghua Shenzhen  Dalian Zeus

Good diversification

The 3 months correlation between Penghua and Dalian is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Penghua Shenzhen Energy and Dalian Zeus Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dalian Zeus Entertainment and Penghua Shenzhen 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 Penghua Shenzhen Energy are associated (or correlated) with Dalian Zeus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dalian Zeus Entertainment has no effect on the direction of Penghua Shenzhen i.e., Penghua Shenzhen and Dalian Zeus go up and down completely randomly.

Pair Corralation between Penghua Shenzhen and Dalian Zeus

Assuming the 90 days trading horizon Penghua Shenzhen Energy is expected to under-perform the Dalian Zeus. But the stock apears to be less risky and, when comparing its historical volatility, Penghua Shenzhen Energy is 9.42 times less risky than Dalian Zeus. The stock trades about -0.06 of its potential returns per unit of risk. The Dalian Zeus Entertainment is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  264.00  in Dalian Zeus Entertainment on September 3, 2024 and sell it today you would earn a total of  226.00  from holding Dalian Zeus Entertainment or generate 85.61% return on investment over 90 days.

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

Penghua Shenzhen Energy  vs.  Dalian Zeus Entertainment

Penghua Shenzhen Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dalian Zeus Entertainment

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dalian Zeus Entertainment are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dalian Zeus sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penghua Shenzhen and Dalian Zeus

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

The idea behind Penghua Shenzhen Energy and Dalian Zeus Entertainment 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.