Correlation Between PG E and Zhongsheng Group

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Can any of the company-specific risk be diversified away by investing in both PG E and Zhongsheng Group 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 PG E and Zhongsheng Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PG E P6 and Zhongsheng Group Holdings, you can compare the effects of market volatilities on PG E and Zhongsheng Group 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 PG E with a short position of Zhongsheng Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of PG E and Zhongsheng Group.

Diversification Opportunities for PG E and Zhongsheng Group

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between PCG6 and Zhongsheng is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding PG E P6 and Zhongsheng Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongsheng Group Holdings and PG E 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 PG E P6 are associated (or correlated) with Zhongsheng Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongsheng Group Holdings has no effect on the direction of PG E i.e., PG E and Zhongsheng Group go up and down completely randomly.

Pair Corralation between PG E and Zhongsheng Group

Assuming the 90 days trading horizon PG E is expected to generate 14.58 times less return on investment than Zhongsheng Group. But when comparing it to its historical volatility, PG E P6 is 5.17 times less risky than Zhongsheng Group. It trades about 0.03 of its potential returns per unit of risk. Zhongsheng Group Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  80.00  in Zhongsheng Group Holdings on September 24, 2024 and sell it today you would earn a total of  102.00  from holding Zhongsheng Group Holdings or generate 127.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

PG E P6  vs.  Zhongsheng Group Holdings

 Performance 
       Timeline  
PG E P6 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in PG E P6 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, PG E is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Zhongsheng Group Holdings 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Zhongsheng Group Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Zhongsheng Group reported solid returns over the last few months and may actually be approaching a breakup point.

PG E and Zhongsheng Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PG E and Zhongsheng Group

The main advantage of trading using opposite PG E and Zhongsheng Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PG E position performs unexpectedly, Zhongsheng Group 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 Zhongsheng Group will offset losses from the drop in Zhongsheng Group's long position.
The idea behind PG E P6 and Zhongsheng Group 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.

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