Correlation Between Henan Shuanghui and Shaanxi Energy

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Can any of the company-specific risk be diversified away by investing in both Henan Shuanghui and Shaanxi 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 Henan Shuanghui and Shaanxi Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Henan Shuanghui Investment and Shaanxi Energy Investment, you can compare the effects of market volatilities on Henan Shuanghui and Shaanxi 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 Henan Shuanghui with a short position of Shaanxi Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Henan Shuanghui and Shaanxi Energy.

Diversification Opportunities for Henan Shuanghui and Shaanxi Energy

HenanShaanxiDiversified AwayHenanShaanxiDiversified Away100%
0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between Henan and Shaanxi is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Henan Shuanghui Investment and Shaanxi Energy Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaanxi Energy Investment and Henan Shuanghui 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 Henan Shuanghui Investment are associated (or correlated) with Shaanxi Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaanxi Energy Investment has no effect on the direction of Henan Shuanghui i.e., Henan Shuanghui and Shaanxi Energy go up and down completely randomly.

Pair Corralation between Henan Shuanghui and Shaanxi Energy

Assuming the 90 days trading horizon Henan Shuanghui Investment is expected to generate 0.9 times more return on investment than Shaanxi Energy. However, Henan Shuanghui Investment is 1.11 times less risky than Shaanxi Energy. It trades about 0.11 of its potential returns per unit of risk. Shaanxi Energy Investment is currently generating about 0.07 per unit of risk. If you would invest  2,355  in Henan Shuanghui Investment on September 20, 2024 and sell it today you would earn a total of  265.00  from holding Henan Shuanghui Investment or generate 11.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Henan Shuanghui Investment  vs.  Shaanxi Energy Investment

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 05101520
JavaScript chart by amCharts 3.21.15000895 001286
       Timeline  
Henan Shuanghui Inve 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Henan Shuanghui Investment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Henan Shuanghui may actually be approaching a critical reversion point that can send shares even higher in January 2025.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec23242526272829
Shaanxi Energy Investment 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Shaanxi Energy Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shaanxi Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec99.51010.51111.512

Henan Shuanghui and Shaanxi Energy Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.63-4.21-2.8-1.390.02351.482.984.495.99 0.020.040.060.080.100.12
JavaScript chart by amCharts 3.21.15000895 001286
       Returns  

Pair Trading with Henan Shuanghui and Shaanxi Energy

The main advantage of trading using opposite Henan Shuanghui and Shaanxi Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Henan Shuanghui position performs unexpectedly, Shaanxi 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 Shaanxi Energy will offset losses from the drop in Shaanxi Energy's long position.
The idea behind Henan Shuanghui Investment and Shaanxi Energy Investment 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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