Correlation Between Pengxin International and Dalian Thermal

Can any of the company-specific risk be diversified away by investing in both Pengxin International and Dalian Thermal 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 Dalian Thermal 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 Dalian Thermal Power, you can compare the effects of market volatilities on Pengxin International and Dalian Thermal 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 Dalian Thermal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pengxin International and Dalian Thermal.

Diversification Opportunities for Pengxin International and Dalian Thermal

0.3

Correlation Coefficient

Pengxin International  Dalian Thermal

Weak diversification

The 3 months correlation between Pengxin and Dalian is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Pengxin International Mining and Dalian Thermal Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dalian Thermal Power 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 Dalian Thermal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dalian Thermal Power has no effect on the direction of Pengxin International i.e., Pengxin International and Dalian Thermal go up and down completely randomly.

Pair Corralation between Pengxin International and Dalian Thermal

Assuming the 90 days trading horizon Pengxin International is expected to generate 5.91 times less return on investment than Dalian Thermal. But when comparing it to its historical volatility, Pengxin International Mining is 1.3 times less risky than Dalian Thermal. It trades about 0.01 of its potential returns per unit of risk. Dalian Thermal Power is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  485.00  in Dalian Thermal Power on October 22, 2024 and sell it today you would earn a total of  145.00  from holding Dalian Thermal Power or generate 29.9% return on investment over 90 days.

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

Pengxin International Mining  vs.  Dalian Thermal Power

Pengxin International

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pengxin International Mining are ranked lower than 4 (%) 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.

Dalian Thermal Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dalian Thermal Power 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.

Pair Trading with Pengxin International and Dalian Thermal

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

The idea behind Pengxin International Mining and Dalian Thermal Power 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.