Correlation Between MEITUAN UNSPADR/2B and ENN Energy

Can any of the company-specific risk be diversified away by investing in both MEITUAN UNSPADR/2B and ENN 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 MEITUAN UNSPADR/2B and ENN Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MEITUAN UNSPADR2B and ENN Energy Holdings, you can compare the effects of market volatilities on MEITUAN UNSPADR/2B and ENN 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 MEITUAN UNSPADR/2B with a short position of ENN Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of MEITUAN UNSPADR/2B and ENN Energy.

Diversification Opportunities for MEITUAN UNSPADR/2B and ENN Energy

0.86

Correlation Coefficient

MEITUAN UNSPADR/2B  ENN Energy

Very poor diversification

The 3 months correlation between MEITUAN and ENN is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding MEITUAN UNSPADR2B and ENN Energy Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENN Energy Holdings and MEITUAN UNSPADR/2B 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 MEITUAN UNSPADR2B are associated (or correlated) with ENN Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENN Energy Holdings has no effect on the direction of MEITUAN UNSPADR/2B i.e., MEITUAN UNSPADR/2B and ENN Energy go up and down completely randomly.

Pair Corralation between MEITUAN UNSPADR/2B and ENN Energy

Assuming the 90 days trading horizon MEITUAN UNSPADR2B is expected to generate 1.56 times more return on investment than ENN Energy. However, MEITUAN UNSPADR/2B is 1.56 times more volatile than ENN Energy Holdings. It trades about 0.15 of its potential returns per unit of risk. ENN Energy Holdings is currently generating about 0.12 per unit of risk. If you would invest  2,680  in MEITUAN UNSPADR2B on September 3, 2024 and sell it today you would earn a total of  1,400  from holding MEITUAN UNSPADR2B or generate 52.24% return on investment over 90 days.

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

MEITUAN UNSPADR2B  vs.  ENN Energy Holdings

MEITUAN UNSPADR/2B

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MEITUAN UNSPADR2B are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental indicators, MEITUAN UNSPADR/2B reported solid returns over the last few months and may actually be approaching a breakup point.

ENN Energy Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ENN Energy Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, ENN Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MEITUAN UNSPADR/2B and ENN Energy

The main advantage of trading using opposite MEITUAN UNSPADR/2B and ENN Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MEITUAN UNSPADR/2B position performs unexpectedly, ENN 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 ENN Energy will offset losses from the drop in ENN Energy's long position.

The idea behind MEITUAN UNSPADR2B and ENN Energy Holdings 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.