Correlation Between Safe and Weichai Power

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

By analyzing existing cross correlation between Safe and Green and Weichai Power Co, you can compare the effects of market volatilities on Safe and Weichai Power 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 Safe with a short position of Weichai Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Safe and Weichai Power.

Diversification Opportunities for Safe and Weichai Power

0.62

Correlation Coefficient

Safe  Weichai Power

Poor diversification

The 3 months correlation between Safe and Weichai is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Safe and Green and Weichai Power Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weichai Power and Safe 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 Safe and Green are associated (or correlated) with Weichai Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weichai Power has no effect on the direction of Safe i.e., Safe and Weichai Power go up and down completely randomly.

Pair Corralation between Safe and Weichai Power

Considering the 90-day investment horizon Safe and Green is expected to under-perform the Weichai Power. In addition to that, Safe is 10.36 times more volatile than Weichai Power Co. It trades about -0.1 of its total potential returns per unit of risk. Weichai Power Co is currently generating about 0.27 per unit of volatility. If you would invest  156.00  in Weichai Power Co on September 4, 2024 and sell it today you would earn a total of  5.00  from holding Weichai Power Co or generate 3.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	21.88%
Values	Daily Returns

Safe and Green  vs.  Weichai Power Co

Safe and Green

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safe and Green has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Weichai Power

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Weichai Power Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile fundamental indicators, Weichai Power reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Safe and Weichai Power

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

The idea behind Safe and Green and Weichai Power Co 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.