Correlation Between Changjiang Jinggong and CNPC Capital

Can any of the company-specific risk be diversified away by investing in both Changjiang Jinggong and CNPC Capital 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 Changjiang Jinggong and CNPC Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Changjiang Jinggong Steel and CNPC Capital Co, you can compare the effects of market volatilities on Changjiang Jinggong and CNPC Capital 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 Changjiang Jinggong with a short position of CNPC Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changjiang Jinggong and CNPC Capital.

Diversification Opportunities for Changjiang Jinggong and CNPC Capital

-0.15

Correlation Coefficient

Changjiang Jinggong  CNPC Capital

Good diversification

The 3 months correlation between Changjiang and CNPC is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Changjiang Jinggong Steel and CNPC Capital Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNPC Capital and Changjiang Jinggong 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 Changjiang Jinggong Steel are associated (or correlated) with CNPC Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNPC Capital has no effect on the direction of Changjiang Jinggong i.e., Changjiang Jinggong and CNPC Capital go up and down completely randomly.

Pair Corralation between Changjiang Jinggong and CNPC Capital

Assuming the 90 days trading horizon Changjiang Jinggong Steel is expected to generate 0.8 times more return on investment than CNPC Capital. However, Changjiang Jinggong Steel is 1.26 times less risky than CNPC Capital. It trades about 0.12 of its potential returns per unit of risk. CNPC Capital Co is currently generating about -0.09 per unit of risk. If you would invest  301.00  in Changjiang Jinggong Steel on December 26, 2024 and sell it today you would earn a total of  28.00  from holding Changjiang Jinggong Steel or generate 9.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Changjiang Jinggong Steel  vs.  CNPC Capital Co

Changjiang Jinggong Steel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Changjiang Jinggong Steel are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changjiang Jinggong may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CNPC Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days CNPC Capital Co 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 Changjiang Jinggong and CNPC Capital

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

The idea behind Changjiang Jinggong Steel and CNPC Capital 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.

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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.