Correlation Between Penyao Environmental and Zhangjiagang Elegant

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

Diversification Opportunities for Penyao Environmental and Zhangjiagang Elegant

0.39

Correlation Coefficient

Penyao Environmental  Zhangjiagang Elegant

Weak diversification

The 3 months correlation between Penyao and Zhangjiagang is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Penyao Environmental Protectio and Zhangjiagang Elegant Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhangjiagang Elegant Home 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 Zhangjiagang Elegant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhangjiagang Elegant Home has no effect on the direction of Penyao Environmental i.e., Penyao Environmental and Zhangjiagang Elegant go up and down completely randomly.

Pair Corralation between Penyao Environmental and Zhangjiagang Elegant

Assuming the 90 days trading horizon Penyao Environmental Protection is expected to generate 1.37 times more return on investment than Zhangjiagang Elegant. However, Penyao Environmental is 1.37 times more volatile than Zhangjiagang Elegant Home. It trades about 0.04 of its potential returns per unit of risk. Zhangjiagang Elegant Home is currently generating about -0.01 per unit of risk. If you would invest  488.00  in Penyao Environmental Protection on October 23, 2024 and sell it today you would earn a total of  31.00  from holding Penyao Environmental Protection or generate 6.35% return on investment over 90 days.

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

Penyao Environmental Protectio  vs.  Zhangjiagang Elegant Home

Penyao Environmental

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penyao Environmental Protection are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Penyao Environmental may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Zhangjiagang Elegant Home

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Penyao Environmental Protection and Zhangjiagang Elegant Home 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.