Correlation Between Sinocat Environmental and Penyao Environmental

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

By analyzing existing cross correlation between Sinocat Environmental Technology and Penyao Environmental Protection, you can compare the effects of market volatilities on Sinocat Environmental and Penyao Environmental 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 Sinocat Environmental with a short position of Penyao Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinocat Environmental and Penyao Environmental.

Diversification Opportunities for Sinocat Environmental and Penyao Environmental

0.94

Correlation Coefficient

Sinocat Environmental  Penyao Environmental

Almost no diversification

The 3 months correlation between Sinocat and Penyao is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Sinocat Environmental Technolo and Penyao Environmental Protectio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penyao Environmental and Sinocat Environmental 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 Sinocat Environmental Technology are associated (or correlated) with Penyao Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penyao Environmental has no effect on the direction of Sinocat Environmental i.e., Sinocat Environmental and Penyao Environmental go up and down completely randomly.

Pair Corralation between Sinocat Environmental and Penyao Environmental

Assuming the 90 days trading horizon Sinocat Environmental is expected to generate 1.07 times less return on investment than Penyao Environmental. In addition to that, Sinocat Environmental is 1.03 times more volatile than Penyao Environmental Protection. It trades about 0.19 of its total potential returns per unit of risk. Penyao Environmental Protection is currently generating about 0.21 per unit of volatility. If you would invest  404.00  in Penyao Environmental Protection on September 4, 2024 and sell it today you would earn a total of  227.00  from holding Penyao Environmental Protection or generate 56.19% return on investment over 90 days.

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

Sinocat Environmental Technolo  vs.  Penyao Environmental Protectio

Sinocat Environmental

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sinocat Environmental Technology are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sinocat Environmental sustained solid returns over the last few months and may actually be approaching a breakup point.

Penyao Environmental

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Penyao Environmental Protection are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Penyao Environmental sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sinocat Environmental and Penyao Environmental

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

The idea behind Sinocat Environmental Technology and Penyao Environmental Protection 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.