Correlation Between Penghua Shenzhen and Niutech Environment

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

Diversification Opportunities for Penghua Shenzhen and Niutech Environment

0.0

Correlation Coefficient

Penghua Shenzhen  Niutech Environment

Pay attention - limited upside

The 3 months correlation between Penghua and Niutech is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Penghua Shenzhen Energy and Niutech Environment Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Niutech Environment 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 Niutech Environment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Niutech Environment has no effect on the direction of Penghua Shenzhen i.e., Penghua Shenzhen and Niutech Environment go up and down completely randomly.

Pair Corralation between Penghua Shenzhen and Niutech Environment

Assuming the 90 days trading horizon Penghua Shenzhen Energy is expected to under-perform the Niutech Environment. But the stock apears to be less risky and, when comparing its historical volatility, Penghua Shenzhen Energy is 5.17 times less risky than Niutech Environment. The stock trades about -0.01 of its potential returns per unit of risk. The Niutech Environment Technology is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,190  in Niutech Environment Technology on September 25, 2024 and sell it today you would earn a total of  145.00  from holding Niutech Environment Technology or generate 12.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.18%
Values	Daily Returns

Penghua Shenzhen Energy  vs.  Niutech Environment Technology

Penghua Shenzhen Energy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Penghua Shenzhen Energy are ranked lower than 9 (%) 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.

Niutech Environment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Niutech Environment Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Niutech Environment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penghua Shenzhen and Niutech Environment

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

The idea behind Penghua Shenzhen Energy and Niutech Environment Technology 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.

Check out your portfolio center.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.