Correlation Between Penyao Environmental and DR

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

Diversification Opportunities for Penyao Environmental and DR

-0.03

Correlation Coefficient

Penyao Environmental  DR

Good diversification

The 3 months correlation between Penyao and DR is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Penyao Environmental Protectio and DR Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DR Limited 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 DR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DR Limited has no effect on the direction of Penyao Environmental i.e., Penyao Environmental and DR go up and down completely randomly.

Pair Corralation between Penyao Environmental and DR

Assuming the 90 days trading horizon Penyao Environmental Protection is expected to under-perform the DR. But the stock apears to be less risky and, when comparing its historical volatility, Penyao Environmental Protection is 1.66 times less risky than DR. The stock trades about -0.01 of its potential returns per unit of risk. The DR Limited is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,355  in DR Limited on December 23, 2024 and sell it today you would earn a total of  583.00  from holding DR Limited or generate 24.76% return on investment over 90 days.

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

Penyao Environmental Protectio  vs.  DR Limited

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 somewhat strong basic indicators, Penyao Environmental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

DR Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DR Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DR sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penyao Environmental and DR

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

The idea behind Penyao Environmental Protection and DR Limited 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.