Correlation Between Penghua Shenzhen and Kweichow Moutai

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

Diversification Opportunities for Penghua Shenzhen and Kweichow Moutai

-0.4

Correlation Coefficient

Penghua Shenzhen  Kweichow Moutai

Very good diversification

The 3 months correlation between Penghua and Kweichow is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Penghua Shenzhen Energy and Kweichow Moutai Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kweichow Moutai 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 Kweichow Moutai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kweichow Moutai has no effect on the direction of Penghua Shenzhen i.e., Penghua Shenzhen and Kweichow Moutai go up and down completely randomly.

Pair Corralation between Penghua Shenzhen and Kweichow Moutai

Assuming the 90 days trading horizon Penghua Shenzhen Energy is expected to generate 0.45 times more return on investment than Kweichow Moutai. However, Penghua Shenzhen Energy is 2.24 times less risky than Kweichow Moutai. It trades about 0.17 of its potential returns per unit of risk. Kweichow Moutai Co is currently generating about -0.03 per unit of risk. If you would invest  603.00  in Penghua Shenzhen Energy on December 4, 2024 and sell it today you would earn a total of  32.00  from holding Penghua Shenzhen Energy or generate 5.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Penghua Shenzhen Energy  vs.  Kweichow Moutai Co

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 13 (%) 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.

Kweichow Moutai

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Penghua Shenzhen and Kweichow Moutai

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

The idea behind Penghua Shenzhen Energy and Kweichow Moutai Co 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.