Correlation Between Penyao Environmental and Guangdong Provincial

Can any of the company-specific risk be diversified away by investing in both Penyao Environmental and Guangdong Provincial 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 Penyao Environmental and Guangdong Provincial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Penyao Environmental Protection and Guangdong Provincial Expressway, you can compare the effects of market volatilities on Penyao Environmental and Guangdong Provincial 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 Penyao Environmental with a short position of Guangdong Provincial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penyao Environmental and Guangdong Provincial.

Diversification Opportunities for Penyao Environmental and Guangdong Provincial

0.36

Correlation Coefficient

Penyao Environmental  Guangdong Provincial

Weak diversification

The 3 months correlation between Penyao and Guangdong is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Penyao Environmental Protectio and Guangdong Provincial Expresswa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Provincial and Penyao Environmental 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 Penyao Environmental Protection are associated (or correlated) with Guangdong Provincial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Provincial has no effect on the direction of Penyao Environmental i.e., Penyao Environmental and Guangdong Provincial go up and down completely randomly.

Pair Corralation between Penyao Environmental and Guangdong Provincial

Assuming the 90 days trading horizon Penyao Environmental Protection is expected to generate 0.79 times more return on investment than Guangdong Provincial. However, Penyao Environmental Protection is 1.27 times less risky than Guangdong Provincial. It trades about 0.16 of its potential returns per unit of risk. Guangdong Provincial Expressway is currently generating about -0.01 per unit of risk. If you would invest  515.00  in Penyao Environmental Protection on December 27, 2024 and sell it today you would earn a total of  23.00  from holding Penyao Environmental Protection or generate 4.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Penyao Environmental Protectio  vs.  Guangdong Provincial Expresswa

Penyao Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Penyao Environmental Protection 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.

Guangdong Provincial

Risk-Adjusted Performance

Weak

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

Pair Trading with Penyao Environmental and Guangdong Provincial

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

The idea behind Penyao Environmental Protection and Guangdong Provincial Expressway 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.