Correlation Between Penghua Shenzhen and MayAir Technology

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

Diversification Opportunities for Penghua Shenzhen and MayAir Technology

-0.43

Correlation Coefficient

Penghua Shenzhen  MayAir Technology

Very good diversification

The 3 months correlation between Penghua and MayAir is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Penghua Shenzhen Energy and MayAir Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MayAir Technology 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 MayAir Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MayAir Technology has no effect on the direction of Penghua Shenzhen i.e., Penghua Shenzhen and MayAir Technology go up and down completely randomly.

Pair Corralation between Penghua Shenzhen and MayAir Technology

Assuming the 90 days trading horizon Penghua Shenzhen Energy is expected to under-perform the MayAir Technology. But the stock apears to be less risky and, when comparing its historical volatility, Penghua Shenzhen Energy is 6.25 times less risky than MayAir Technology. The stock trades about -0.01 of its potential returns per unit of risk. The MayAir Technology Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,137  in MayAir Technology Co on September 27, 2024 and sell it today you would earn a total of  321.00  from holding MayAir Technology Co or generate 10.23% return on investment over 90 days.

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

Penghua Shenzhen Energy  vs.  MayAir Technology Co

Penghua Shenzhen Energy

Risk-Adjusted Performance

14 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Penghua Shenzhen Energy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Penghua Shenzhen may actually be approaching a critical reversion point that can send shares even higher in January 2025.

MayAir Technology

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MayAir Technology Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, MayAir Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penghua Shenzhen and MayAir Technology

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

The idea behind Penghua Shenzhen Energy and MayAir Technology 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.