Correlation Between Penghua Shenzhen and Metallurgical

Can any of the company-specific risk be diversified away by investing in both Penghua Shenzhen and Metallurgical 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 Metallurgical 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 Metallurgical of, you can compare the effects of market volatilities on Penghua Shenzhen and Metallurgical 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 Metallurgical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penghua Shenzhen and Metallurgical.

Diversification Opportunities for Penghua Shenzhen and Metallurgical

-0.44

Correlation Coefficient

Penghua Shenzhen  Metallurgical

Very good diversification

The 3 months correlation between Penghua and Metallurgical is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Penghua Shenzhen Energy and Metallurgical of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metallurgical 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 Metallurgical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metallurgical has no effect on the direction of Penghua Shenzhen i.e., Penghua Shenzhen and Metallurgical go up and down completely randomly.

Pair Corralation between Penghua Shenzhen and Metallurgical

Assuming the 90 days trading horizon Penghua Shenzhen is expected to generate 13.34 times less return on investment than Metallurgical. But when comparing it to its historical volatility, Penghua Shenzhen Energy is 5.69 times less risky than Metallurgical. It trades about 0.07 of its potential returns per unit of risk. Metallurgical of is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  260.00  in Metallurgical of on September 14, 2024 and sell it today you would earn a total of  85.00  from holding Metallurgical of or generate 32.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Penghua Shenzhen Energy  vs.  Metallurgical of

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.

Metallurgical

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Penghua Shenzhen and Metallurgical

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

The idea behind Penghua Shenzhen Energy and Metallurgical of 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.