Correlation Between Eit Environmental and Maoming Petro

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

By analyzing existing cross correlation between Eit Environmental Development and Maoming Petro Chemical Shihua, you can compare the effects of market volatilities on Eit Environmental and Maoming Petro 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 Eit Environmental with a short position of Maoming Petro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eit Environmental and Maoming Petro.

Diversification Opportunities for Eit Environmental and Maoming Petro

0.77

Correlation Coefficient

Eit Environmental  Maoming Petro

Poor diversification

The 3 months correlation between Eit and Maoming is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Eit Environmental Development and Maoming Petro Chemical Shihua in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maoming Petro Chemical and Eit 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 Eit Environmental Development are associated (or correlated) with Maoming Petro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maoming Petro Chemical has no effect on the direction of Eit Environmental i.e., Eit Environmental and Maoming Petro go up and down completely randomly.

Pair Corralation between Eit Environmental and Maoming Petro

Assuming the 90 days trading horizon Eit Environmental Development is expected to generate 0.82 times more return on investment than Maoming Petro. However, Eit Environmental Development is 1.21 times less risky than Maoming Petro. It trades about -0.3 of its potential returns per unit of risk. Maoming Petro Chemical Shihua is currently generating about -0.34 per unit of risk. If you would invest  1,688  in Eit Environmental Development on October 9, 2024 and sell it today you would lose (210.00) from holding Eit Environmental Development or give up 12.44% of portfolio value over 90 days.

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

Eit Environmental Development  vs.  Maoming Petro Chemical Shihua

Eit Environmental

Risk-Adjusted Performance

3 of 100

Insignificant

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

Maoming Petro Chemical

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Maoming Petro Chemical Shihua are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Maoming Petro may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Eit Environmental and Maoming Petro

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

The idea behind Eit Environmental Development and Maoming Petro Chemical Shihua 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.