Correlation Between Chun Yuan and Penpower Technology

Can any of the company-specific risk be diversified away by investing in both Chun Yuan and Penpower Technology 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 Chun Yuan and Penpower Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chun Yuan Steel and Penpower Technology, you can compare the effects of market volatilities on Chun Yuan and Penpower Technology 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 Chun Yuan with a short position of Penpower Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chun Yuan and Penpower Technology.

Diversification Opportunities for Chun Yuan and Penpower Technology

-0.12

Correlation Coefficient

Chun Yuan  Penpower Technology

Good diversification

The 3 months correlation between Chun and Penpower is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Chun Yuan Steel and Penpower Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penpower Technology and Chun Yuan 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 Chun Yuan Steel are associated (or correlated) with Penpower Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penpower Technology has no effect on the direction of Chun Yuan i.e., Chun Yuan and Penpower Technology go up and down completely randomly.

Pair Corralation between Chun Yuan and Penpower Technology

Assuming the 90 days trading horizon Chun Yuan Steel is expected to under-perform the Penpower Technology. But the stock apears to be less risky and, when comparing its historical volatility, Chun Yuan Steel is 1.05 times less risky than Penpower Technology. The stock trades about -0.16 of its potential returns per unit of risk. The Penpower Technology is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  2,720  in Penpower Technology on October 10, 2024 and sell it today you would lose (80.00) from holding Penpower Technology or give up 2.94% of portfolio value over 90 days.

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

Chun Yuan Steel  vs.  Penpower Technology

Chun Yuan Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chun Yuan Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chun Yuan is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Penpower Technology

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Penpower Technology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Penpower Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chun Yuan and Penpower Technology

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

The idea behind Chun Yuan Steel and Penpower Technology 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.