Correlation Between ALERION CLEANPOWER and China Merchants

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

By analyzing existing cross correlation between ALERION CLEANPOWER and China Merchants Port, you can compare the effects of market volatilities on ALERION CLEANPOWER and China Merchants 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 ALERION CLEANPOWER with a short position of China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALERION CLEANPOWER and China Merchants.

Diversification Opportunities for ALERION CLEANPOWER and China Merchants

-0.24

Correlation Coefficient

ALERION CLEANPOWER  China Merchants

Very good diversification

The 3 months correlation between ALERION and China is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding ALERION CLEANPOWER and China Merchants Port in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Merchants Port and ALERION CLEANPOWER 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 ALERION CLEANPOWER are associated (or correlated) with China Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Merchants Port has no effect on the direction of ALERION CLEANPOWER i.e., ALERION CLEANPOWER and China Merchants go up and down completely randomly.

Pair Corralation between ALERION CLEANPOWER and China Merchants

Assuming the 90 days trading horizon ALERION CLEANPOWER is expected to under-perform the China Merchants. But the stock apears to be less risky and, when comparing its historical volatility, ALERION CLEANPOWER is 2.28 times less risky than China Merchants. The stock trades about 0.0 of its potential returns per unit of risk. The China Merchants Port is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  51.00  in China Merchants Port on October 9, 2024 and sell it today you would earn a total of  111.00  from holding China Merchants Port or generate 217.65% return on investment over 90 days.

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

ALERION CLEANPOWER  vs.  China Merchants Port

ALERION CLEANPOWER

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ALERION CLEANPOWER are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ALERION CLEANPOWER may actually be approaching a critical reversion point that can send shares even higher in February 2025.

China Merchants Port

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Merchants Port are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, China Merchants may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ALERION CLEANPOWER and China Merchants

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

The idea behind ALERION CLEANPOWER and China Merchants Port 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..