Correlation Between China Shenhua and OAKTRSPECLENDNEW

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

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

Diversification Opportunities for China Shenhua and OAKTRSPECLENDNEW

0.38

Correlation Coefficient

China Shenhua  OAKTRSPECLENDNEW

Weak diversification

The 3 months correlation between China and OAKTRSPECLENDNEW is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding China Shenhua Energy and OAKTRSPECLENDNEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OAKTRSPECLENDNEW and China Shenhua 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 China Shenhua Energy are associated (or correlated) with OAKTRSPECLENDNEW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OAKTRSPECLENDNEW has no effect on the direction of China Shenhua i.e., China Shenhua and OAKTRSPECLENDNEW go up and down completely randomly.

Pair Corralation between China Shenhua and OAKTRSPECLENDNEW

Assuming the 90 days horizon China Shenhua Energy is expected to generate 2.51 times more return on investment than OAKTRSPECLENDNEW. However, China Shenhua is 2.51 times more volatile than OAKTRSPECLENDNEW. It trades about 0.12 of its potential returns per unit of risk. OAKTRSPECLENDNEW is currently generating about 0.08 per unit of risk. If you would invest  381.00  in China Shenhua Energy on September 15, 2024 and sell it today you would earn a total of  31.00  from holding China Shenhua Energy or generate 8.14% return on investment over 90 days.

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

China Shenhua Energy  vs.  OAKTRSPECLENDNEW

China Shenhua Energy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Shenhua Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Shenhua reported solid returns over the last few months and may actually be approaching a breakup point.

OAKTRSPECLENDNEW

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OAKTRSPECLENDNEW are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, OAKTRSPECLENDNEW is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with China Shenhua and OAKTRSPECLENDNEW

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

The idea behind China Shenhua Energy and OAKTRSPECLENDNEW 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.