Correlation Between China Shenhua and Guangzhou KingTeller

Can any of the company-specific risk be diversified away by investing in both China Shenhua and Guangzhou KingTeller 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 China Shenhua and Guangzhou KingTeller into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Shenhua Energy and Guangzhou KingTeller Technology, you can compare the effects of market volatilities on China Shenhua and Guangzhou KingTeller 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 China Shenhua with a short position of Guangzhou KingTeller. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Shenhua and Guangzhou KingTeller.

Diversification Opportunities for China Shenhua and Guangzhou KingTeller

0.29

Correlation Coefficient

China Shenhua  Guangzhou KingTeller

Modest diversification

The 3 months correlation between China and Guangzhou is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding China Shenhua Energy and Guangzhou KingTeller Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou KingTeller and China Shenhua 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 China Shenhua Energy are associated (or correlated) with Guangzhou KingTeller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou KingTeller has no effect on the direction of China Shenhua i.e., China Shenhua and Guangzhou KingTeller go up and down completely randomly.

Pair Corralation between China Shenhua and Guangzhou KingTeller

Assuming the 90 days trading horizon China Shenhua Energy is expected to under-perform the Guangzhou KingTeller. But the stock apears to be less risky and, when comparing its historical volatility, China Shenhua Energy is 2.65 times less risky than Guangzhou KingTeller. The stock trades about -0.48 of its potential returns per unit of risk. The Guangzhou KingTeller Technology is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  471.00  in Guangzhou KingTeller Technology on December 4, 2024 and sell it today you would earn a total of  14.00  from holding Guangzhou KingTeller Technology or generate 2.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

China Shenhua Energy  vs.  Guangzhou KingTeller Technolog

China Shenhua Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Shenhua Energy 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.

Guangzhou KingTeller

Risk-Adjusted Performance

Weak

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

Pair Trading with China Shenhua and Guangzhou KingTeller

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

The idea behind China Shenhua Energy and Guangzhou KingTeller Technology 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.