Correlation Between Tianneng Battery and Shenwu Energy

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

By analyzing existing cross correlation between Tianneng Battery Group and Shenwu Energy Saving, you can compare the effects of market volatilities on Tianneng Battery and Shenwu Energy 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 Tianneng Battery with a short position of Shenwu Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tianneng Battery and Shenwu Energy.

Diversification Opportunities for Tianneng Battery and Shenwu Energy

-0.2

Correlation Coefficient

Tianneng Battery  Shenwu Energy

Good diversification

The 3 months correlation between Tianneng and Shenwu is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Tianneng Battery Group and Shenwu Energy Saving in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenwu Energy Saving and Tianneng Battery 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 Tianneng Battery Group are associated (or correlated) with Shenwu Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenwu Energy Saving has no effect on the direction of Tianneng Battery i.e., Tianneng Battery and Shenwu Energy go up and down completely randomly.

Pair Corralation between Tianneng Battery and Shenwu Energy

Assuming the 90 days trading horizon Tianneng Battery Group is expected to under-perform the Shenwu Energy. But the stock apears to be less risky and, when comparing its historical volatility, Tianneng Battery Group is 3.57 times less risky than Shenwu Energy. The stock trades about -0.35 of its potential returns per unit of risk. The Shenwu Energy Saving is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  427.00  in Shenwu Energy Saving on October 11, 2024 and sell it today you would lose (38.00) from holding Shenwu Energy Saving or give up 8.9% of portfolio value over 90 days.

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

Tianneng Battery Group  vs.  Shenwu Energy Saving

Tianneng Battery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tianneng Battery Group 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Shenwu Energy Saving

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shenwu Energy Saving are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenwu Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tianneng Battery and Shenwu Energy

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

The idea behind Tianneng Battery Group and Shenwu Energy Saving 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.

Check out your portfolio center.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.