Correlation Between China Energy and Vinci S

Can any of the company-specific risk be diversified away by investing in both China Energy and Vinci S 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 China Energy and Vinci S into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Energy Engineering and Vinci S A, you can compare the effects of market volatilities on China Energy and Vinci S 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 China Energy with a short position of Vinci S. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Energy and Vinci S.

Diversification Opportunities for China Energy and Vinci S

-0.44

Correlation Coefficient

China Energy  Vinci S

Very good diversification

The 3 months correlation between China and Vinci is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding China Energy Engineering and Vinci S A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vinci S A and China Energy 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 China Energy Engineering are associated (or correlated) with Vinci S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vinci S A has no effect on the direction of China Energy i.e., China Energy and Vinci S go up and down completely randomly.

Pair Corralation between China Energy and Vinci S

Assuming the 90 days horizon China Energy Engineering is expected to generate 4.32 times more return on investment than Vinci S. However, China Energy is 4.32 times more volatile than Vinci S A. It trades about 0.19 of its potential returns per unit of risk. Vinci S A is currently generating about -0.09 per unit of risk. If you would invest  10.00  in China Energy Engineering on September 23, 2024 and sell it today you would earn a total of  2.00  from holding China Energy Engineering or generate 20.0% return on investment over 90 days.

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

China Energy Engineering  vs.  Vinci S A

China Energy Engineering

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Energy Engineering are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Vinci S A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vinci S A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with China Energy and Vinci S

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

The idea behind China Energy Engineering and Vinci S A 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.