Correlation Between BTG Hotels and Shenwu Energy

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

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

Diversification Opportunities for BTG Hotels and Shenwu Energy

0.69

Correlation Coefficient

BTG Hotels  Shenwu Energy

Poor diversification

The 3 months correlation between BTG and Shenwu is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding BTG Hotels Group and Shenwu Energy Saving in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenwu Energy Saving and BTG Hotels 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 BTG Hotels Group are associated (or correlated) with Shenwu Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenwu Energy Saving has no effect on the direction of BTG Hotels i.e., BTG Hotels and Shenwu Energy go up and down completely randomly.

Pair Corralation between BTG Hotels and Shenwu Energy

Assuming the 90 days trading horizon BTG Hotels Group is expected to generate 0.39 times more return on investment than Shenwu Energy. However, BTG Hotels Group is 2.57 times less risky than Shenwu Energy. It trades about -0.1 of its potential returns per unit of risk. Shenwu Energy Saving is currently generating about -0.09 per unit of risk. If you would invest  1,459  in BTG Hotels Group on December 5, 2024 and sell it today you would lose (154.00) from holding BTG Hotels Group or give up 10.56% of portfolio value over 90 days.

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

BTG Hotels Group  vs.  Shenwu Energy Saving

BTG Hotels Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days BTG Hotels Group 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.

Shenwu Energy Saving

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenwu Energy Saving has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with BTG Hotels and Shenwu Energy

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

The idea behind BTG Hotels Group and Shenwu Energy Saving 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.