Correlation Between CenterPoint Energy and China Resources

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

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

Diversification Opportunities for CenterPoint Energy and China Resources

-0.32

Correlation Coefficient

CenterPoint Energy  China Resources

Very good diversification

The 3 months correlation between CenterPoint and China is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding CenterPoint Energy and China Resources Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Gas and CenterPoint Energy 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 CenterPoint Energy are associated (or correlated) with China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Gas has no effect on the direction of CenterPoint Energy i.e., CenterPoint Energy and China Resources go up and down completely randomly.

Pair Corralation between CenterPoint Energy and China Resources

Assuming the 90 days horizon CenterPoint Energy is expected to generate 0.52 times more return on investment than China Resources. However, CenterPoint Energy is 1.91 times less risky than China Resources. It trades about 0.22 of its potential returns per unit of risk. China Resources Gas is currently generating about 0.04 per unit of risk. If you would invest  2,502  in CenterPoint Energy on September 25, 2024 and sell it today you would earn a total of  578.00  from holding CenterPoint Energy or generate 23.1% return on investment over 90 days.

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

CenterPoint Energy  vs.  China Resources Gas

CenterPoint Energy

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CenterPoint Energy are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CenterPoint Energy reported solid returns over the last few months and may actually be approaching a breakup point.

China Resources Gas

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with CenterPoint Energy and China Resources

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

The idea behind CenterPoint Energy and China Resources Gas 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.