Correlation Between Penghua Shenzhen and Shenyang Blue

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

Diversification Opportunities for Penghua Shenzhen and Shenyang Blue

-0.71

Correlation Coefficient

Penghua Shenzhen  Shenyang Blue

Pay attention - limited upside

The 3 months correlation between Penghua and Shenyang is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Penghua Shenzhen Energy and Shenyang Blue Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenyang Blue Silver 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 Shenyang Blue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenyang Blue Silver has no effect on the direction of Penghua Shenzhen i.e., Penghua Shenzhen and Shenyang Blue go up and down completely randomly.

Pair Corralation between Penghua Shenzhen and Shenyang Blue

Assuming the 90 days trading horizon Penghua Shenzhen Energy is expected to generate 0.19 times more return on investment than Shenyang Blue. However, Penghua Shenzhen Energy is 5.14 times less risky than Shenyang Blue. It trades about 0.47 of its potential returns per unit of risk. Shenyang Blue Silver is currently generating about -0.51 per unit of risk. If you would invest  601.00  in Penghua Shenzhen Energy on October 6, 2024 and sell it today you would earn a total of  33.00  from holding Penghua Shenzhen Energy or generate 5.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Penghua Shenzhen Energy  vs.  Shenyang Blue Silver

Penghua Shenzhen Energy

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Penghua Shenzhen Energy are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Penghua Shenzhen may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Shenyang Blue Silver

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenyang Blue Silver 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Penghua Shenzhen and Shenyang Blue

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

The idea behind Penghua Shenzhen Energy and Shenyang Blue Silver 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.