Correlation Between Penyao Environmental and Konfoong Materials

Can any of the company-specific risk be diversified away by investing in both Penyao Environmental and Konfoong Materials 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 Konfoong Materials 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 Konfoong Materials International, you can compare the effects of market volatilities on Penyao Environmental and Konfoong Materials 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 Konfoong Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penyao Environmental and Konfoong Materials.

Diversification Opportunities for Penyao Environmental and Konfoong Materials

0.07

Correlation Coefficient

Penyao Environmental  Konfoong Materials

Significant diversification

The 3 months correlation between Penyao and Konfoong is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Penyao Environmental Protectio and Konfoong Materials Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Konfoong Materials 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 Konfoong Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Konfoong Materials has no effect on the direction of Penyao Environmental i.e., Penyao Environmental and Konfoong Materials go up and down completely randomly.

Pair Corralation between Penyao Environmental and Konfoong Materials

Assuming the 90 days trading horizon Penyao Environmental Protection is expected to under-perform the Konfoong Materials. But the stock apears to be less risky and, when comparing its historical volatility, Penyao Environmental Protection is 1.23 times less risky than Konfoong Materials. The stock trades about -0.07 of its potential returns per unit of risk. The Konfoong Materials International is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  7,385  in Konfoong Materials International on December 26, 2024 and sell it today you would lose (349.00) from holding Konfoong Materials International or give up 4.73% of portfolio value over 90 days.

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

Penyao Environmental Protectio  vs.  Konfoong Materials Internation

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Konfoong Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Konfoong Materials International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Konfoong Materials 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 Konfoong Materials

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

The idea behind Penyao Environmental Protection and Konfoong Materials International 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.