Correlation Between Henan Lantian and CNPC Capital

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

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

Diversification Opportunities for Henan Lantian and CNPC Capital

-0.39

Correlation Coefficient

Henan Lantian  CNPC Capital

Very good diversification

The 3 months correlation between Henan and CNPC is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Henan Lantian Gas and CNPC Capital Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNPC Capital and Henan Lantian 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 Henan Lantian Gas 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 Henan Lantian i.e., Henan Lantian and CNPC Capital go up and down completely randomly.

Pair Corralation between Henan Lantian and CNPC Capital

Assuming the 90 days trading horizon Henan Lantian Gas is expected to under-perform the CNPC Capital. But the stock apears to be less risky and, when comparing its historical volatility, Henan Lantian Gas is 2.16 times less risky than CNPC Capital. The stock trades about -0.05 of its potential returns per unit of risk. The 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Henan Lantian Gas  vs.  CNPC Capital Co

Henan Lantian Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Henan Lantian Gas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company 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 Henan Lantian and CNPC Capital

The main advantage of trading using opposite Henan Lantian and CNPC Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Henan Lantian 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 Henan Lantian Gas 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.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.