Correlation Between Penghua Shenzhen and CNPC Capital

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

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

Diversification Opportunities for Penghua Shenzhen and CNPC Capital

-0.69

Correlation Coefficient

Penghua Shenzhen  CNPC Capital

Excellent diversification

The 3 months correlation between Penghua and CNPC is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Penghua Shenzhen Energy and CNPC Capital Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNPC Capital and Penghua Shenzhen 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 Penghua Shenzhen Energy are associated (or correlated) with CNPC Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNPC Capital has no effect on the direction of Penghua Shenzhen i.e., Penghua Shenzhen and CNPC Capital go up and down completely randomly.

Pair Corralation between Penghua Shenzhen and CNPC Capital

Assuming the 90 days trading horizon Penghua Shenzhen is expected to generate 21.93 times less return on investment than CNPC Capital. But when comparing it to its historical volatility, Penghua Shenzhen Energy is 8.7 times less risky than CNPC Capital. It trades about 0.07 of its potential returns per unit of risk. CNPC Capital Co is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  497.00  in CNPC Capital Co on September 13, 2024 and sell it today you would earn a total of  258.00  from holding CNPC Capital Co or generate 51.91% return on investment over 90 days.

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

Penghua Shenzhen Energy  vs.  CNPC Capital Co

Penghua Shenzhen Energy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Penghua Shenzhen Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Penghua Shenzhen is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

CNPC Capital

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CNPC Capital Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CNPC Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penghua Shenzhen and CNPC Capital

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

The idea behind Penghua Shenzhen Energy and CNPC Capital 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.