Correlation Between Ping An and Shenwu Energy

Can any of the company-specific risk be diversified away by investing in both Ping An and Shenwu 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 Ping An and Shenwu Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ping An Insurance and Shenwu Energy Saving, you can compare the effects of market volatilities on Ping An and Shenwu 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 Ping An with a short position of Shenwu Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and Shenwu Energy.

Diversification Opportunities for Ping An and Shenwu Energy

0.38

Correlation Coefficient

Ping An  Shenwu Energy

Weak diversification

The 3 months correlation between Ping and Shenwu is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and Shenwu Energy Saving in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenwu Energy Saving and Ping An 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 Ping An Insurance are associated (or correlated) with Shenwu Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenwu Energy Saving has no effect on the direction of Ping An i.e., Ping An and Shenwu Energy go up and down completely randomly.

Pair Corralation between Ping An and Shenwu Energy

Assuming the 90 days trading horizon Ping An Insurance is expected to under-perform the Shenwu Energy. But the stock apears to be less risky and, when comparing its historical volatility, Ping An Insurance is 1.57 times less risky than Shenwu Energy. The stock trades about -0.04 of its potential returns per unit of risk. The Shenwu Energy Saving is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  323.00  in Shenwu Energy Saving on September 29, 2024 and sell it today you would earn a total of  19.00  from holding Shenwu Energy Saving or generate 5.88% return on investment over 90 days.

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

Ping An Insurance  vs.  Shenwu Energy Saving

Ping An Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ping An Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ping An is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shenwu Energy Saving

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenwu Energy Saving are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenwu Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ping An and Shenwu Energy

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

The idea behind Ping An Insurance and Shenwu Energy Saving 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.