Correlation Between Zhengzhou Coal and Wangneng Environment

Can any of the company-specific risk be diversified away by investing in both Zhengzhou Coal and Wangneng Environment 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 Zhengzhou Coal and Wangneng Environment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhengzhou Coal Mining and Wangneng Environment Co, you can compare the effects of market volatilities on Zhengzhou Coal and Wangneng Environment 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 Zhengzhou Coal with a short position of Wangneng Environment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhengzhou Coal and Wangneng Environment.

Diversification Opportunities for Zhengzhou Coal and Wangneng Environment

0.5

Correlation Coefficient

Zhengzhou Coal  Wangneng Environment

Very weak diversification

The 3 months correlation between Zhengzhou and Wangneng is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Zhengzhou Coal Mining and Wangneng Environment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wangneng Environment and Zhengzhou Coal 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 Zhengzhou Coal Mining are associated (or correlated) with Wangneng Environment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wangneng Environment has no effect on the direction of Zhengzhou Coal i.e., Zhengzhou Coal and Wangneng Environment go up and down completely randomly.

Pair Corralation between Zhengzhou Coal and Wangneng Environment

Assuming the 90 days trading horizon Zhengzhou Coal Mining is expected to under-perform the Wangneng Environment. In addition to that, Zhengzhou Coal is 1.24 times more volatile than Wangneng Environment Co. It trades about -0.01 of its total potential returns per unit of risk. Wangneng Environment Co is currently generating about 0.11 per unit of volatility. If you would invest  1,244  in Wangneng Environment Co on October 4, 2024 and sell it today you would earn a total of  306.00  from holding Wangneng Environment Co or generate 24.6% return on investment over 90 days.

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

Zhengzhou Coal Mining  vs.  Wangneng Environment Co

Zhengzhou Coal Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhengzhou Coal Mining 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.

Wangneng Environment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wangneng Environment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Wangneng Environment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zhengzhou Coal and Wangneng Environment

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

The idea behind Zhengzhou Coal Mining and Wangneng Environment 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 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.