Correlation Between Pengxin International and Hengerda New

Can any of the company-specific risk be diversified away by investing in both Pengxin International and Hengerda New 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 Pengxin International and Hengerda New into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pengxin International Mining and Hengerda New Materials, you can compare the effects of market volatilities on Pengxin International and Hengerda New 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 Pengxin International with a short position of Hengerda New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pengxin International and Hengerda New.

Diversification Opportunities for Pengxin International and Hengerda New

0.58

Correlation Coefficient

Pengxin International  Hengerda New

Very weak diversification

The 3 months correlation between Pengxin and Hengerda is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Pengxin International Mining and Hengerda New Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengerda New Materials and Pengxin International 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 Pengxin International Mining are associated (or correlated) with Hengerda New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengerda New Materials has no effect on the direction of Pengxin International i.e., Pengxin International and Hengerda New go up and down completely randomly.

Pair Corralation between Pengxin International and Hengerda New

Assuming the 90 days trading horizon Pengxin International Mining is expected to generate 1.68 times more return on investment than Hengerda New. However, Pengxin International is 1.68 times more volatile than Hengerda New Materials. It trades about 0.2 of its potential returns per unit of risk. Hengerda New Materials is currently generating about 0.08 per unit of risk. If you would invest  313.00  in Pengxin International Mining on September 29, 2024 and sell it today you would earn a total of  59.00  from holding Pengxin International Mining or generate 18.85% return on investment over 90 days.

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

Pengxin International Mining  vs.  Hengerda New Materials

Pengxin International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pengxin International Mining are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pengxin International sustained solid returns over the last few months and may actually be approaching a breakup point.

Hengerda New Materials

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hengerda New Materials are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hengerda New is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pengxin International and Hengerda New

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

The idea behind Pengxin International Mining and Hengerda New Materials 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.