Correlation Between Wintime Energy and China Satellite

Can any of the company-specific risk be diversified away by investing in both Wintime Energy and China Satellite 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 Wintime Energy and China Satellite into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wintime Energy Co and China Satellite Communications, you can compare the effects of market volatilities on Wintime Energy and China Satellite 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 Wintime Energy with a short position of China Satellite. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wintime Energy and China Satellite.

Diversification Opportunities for Wintime Energy and China Satellite

0.73

Correlation Coefficient

Wintime Energy  China Satellite

Poor diversification

The 3 months correlation between Wintime and China is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Wintime Energy Co and China Satellite Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Satellite Comm and Wintime Energy 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 Wintime Energy Co are associated (or correlated) with China Satellite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Satellite Comm has no effect on the direction of Wintime Energy i.e., Wintime Energy and China Satellite go up and down completely randomly.

Pair Corralation between Wintime Energy and China Satellite

Assuming the 90 days trading horizon Wintime Energy Co is expected to under-perform the China Satellite. In addition to that, Wintime Energy is 1.39 times more volatile than China Satellite Communications. It trades about -0.33 of its total potential returns per unit of risk. China Satellite Communications is currently generating about -0.4 per unit of volatility. If you would invest  2,298  in China Satellite Communications on October 11, 2024 and sell it today you would lose (402.00) from holding China Satellite Communications or give up 17.49% of portfolio value over 90 days.

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

Wintime Energy Co  vs.  China Satellite Communications

Wintime Energy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wintime Energy Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wintime Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

China Satellite Comm

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Satellite Communications are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Satellite sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wintime Energy and China Satellite

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

The idea behind Wintime Energy Co and China Satellite Communications 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.