Correlation Between Shanghai Construction and Wintime Energy

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

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

Diversification Opportunities for Shanghai Construction and Wintime Energy

0.92

Correlation Coefficient

Shanghai Construction  Wintime Energy

Almost no diversification

The 3 months correlation between Shanghai and Wintime is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Construction Group and Wintime Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wintime Energy and Shanghai Construction 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 Shanghai Construction Group are associated (or correlated) with Wintime Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wintime Energy has no effect on the direction of Shanghai Construction i.e., Shanghai Construction and Wintime Energy go up and down completely randomly.

Pair Corralation between Shanghai Construction and Wintime Energy

Assuming the 90 days trading horizon Shanghai Construction is expected to generate 2.82 times less return on investment than Wintime Energy. But when comparing it to its historical volatility, Shanghai Construction Group is 1.53 times less risky than Wintime Energy. It trades about 0.06 of its potential returns per unit of risk. Wintime Energy Co is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  126.00  in Wintime Energy Co on October 19, 2024 and sell it today you would earn a total of  33.00  from holding Wintime Energy Co or generate 26.19% return on investment over 90 days.

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

Shanghai Construction Group  vs.  Wintime Energy Co

Shanghai Construction

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Construction Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Construction may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Wintime Energy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wintime Energy Co are ranked lower than 9 (%) 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.

Pair Trading with Shanghai Construction and Wintime Energy

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

The idea behind Shanghai Construction Group and Wintime Energy Co 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.