Correlation Between Penyao Environmental and Zhengping RoadBridge

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

Diversification Opportunities for Penyao Environmental and Zhengping RoadBridge

0.54

Correlation Coefficient

Penyao Environmental  Zhengping RoadBridge

Very weak diversification

The 3 months correlation between Penyao and Zhengping is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Penyao Environmental Protectio and Zhengping RoadBridge Constr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhengping RoadBridge 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 Zhengping RoadBridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhengping RoadBridge has no effect on the direction of Penyao Environmental i.e., Penyao Environmental and Zhengping RoadBridge go up and down completely randomly.

Pair Corralation between Penyao Environmental and Zhengping RoadBridge

Assuming the 90 days trading horizon Penyao Environmental Protection is expected to under-perform the Zhengping RoadBridge. But the stock apears to be less risky and, when comparing its historical volatility, Penyao Environmental Protection is 1.92 times less risky than Zhengping RoadBridge. The stock trades about -0.07 of its potential returns per unit of risk. The Zhengping RoadBridge Constr is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  358.00  in Zhengping RoadBridge Constr on December 26, 2024 and sell it today you would earn a total of  21.00  from holding Zhengping RoadBridge Constr or generate 5.87% return on investment over 90 days.

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

Penyao Environmental Protectio  vs.  Zhengping RoadBridge Constr

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.

Zhengping RoadBridge

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Penyao Environmental and Zhengping RoadBridge

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

The idea behind Penyao Environmental Protection and Zhengping RoadBridge Constr 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..