Correlation Between Penghua Shenzhen and Beijing SPC

Can any of the company-specific risk be diversified away by investing in both Penghua Shenzhen and Beijing SPC 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 Beijing SPC 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 Beijing SPC Environment, you can compare the effects of market volatilities on Penghua Shenzhen and Beijing SPC 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 Beijing SPC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penghua Shenzhen and Beijing SPC.

Diversification Opportunities for Penghua Shenzhen and Beijing SPC

-0.68

Correlation Coefficient

Penghua Shenzhen  Beijing SPC

Excellent diversification

The 3 months correlation between Penghua and Beijing is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Penghua Shenzhen Energy and Beijing SPC Environment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing SPC Environment 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 Beijing SPC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing SPC Environment has no effect on the direction of Penghua Shenzhen i.e., Penghua Shenzhen and Beijing SPC go up and down completely randomly.

Pair Corralation between Penghua Shenzhen and Beijing SPC

Assuming the 90 days trading horizon Penghua Shenzhen Energy is expected to generate 0.3 times more return on investment than Beijing SPC. However, Penghua Shenzhen Energy is 3.28 times less risky than Beijing SPC. It trades about 0.16 of its potential returns per unit of risk. Beijing SPC Environment is currently generating about -0.13 per unit of risk. If you would invest  605.00  in Penghua Shenzhen Energy on December 1, 2024 and sell it today you would earn a total of  30.00  from holding Penghua Shenzhen Energy or generate 4.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Penghua Shenzhen Energy  vs.  Beijing SPC Environment

Penghua Shenzhen Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Penghua Shenzhen Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. 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.

Beijing SPC Environment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beijing SPC Environment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Penghua Shenzhen and Beijing SPC

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

The idea behind Penghua Shenzhen Energy and Beijing SPC Environment 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..