Correlation Between China Resources and ENN Energy

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

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

Diversification Opportunities for China Resources and ENN Energy

0.64

Correlation Coefficient

China Resources  ENN Energy

Poor diversification

The 3 months correlation between China and ENN is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Gas and ENN Energy Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENN Energy Holdings and China Resources 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 Resources Gas are associated (or correlated) with ENN Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENN Energy Holdings has no effect on the direction of China Resources i.e., China Resources and ENN Energy go up and down completely randomly.

Pair Corralation between China Resources and ENN Energy

Assuming the 90 days trading horizon China Resources Gas is expected to under-perform the ENN Energy. But the stock apears to be less risky and, when comparing its historical volatility, China Resources Gas is 1.57 times less risky than ENN Energy. The stock trades about -0.07 of its potential returns per unit of risk. The ENN Energy Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  695.00  in ENN Energy Holdings on December 28, 2024 and sell it today you would earn a total of  70.00  from holding ENN Energy Holdings or generate 10.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

China Resources Gas  vs.  ENN Energy Holdings

China Resources Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Resources Gas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

ENN Energy Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ENN Energy Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ENN Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with China Resources and ENN Energy

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

The idea behind China Resources Gas and ENN Energy Holdings 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.