Correlation Between PG E and CHINA WATER
Can any of the company-specific risk be diversified away by investing in both PG E and CHINA WATER 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 CHINA WATER 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 CHINA WATER IGR, you can compare the effects of market volatilities on PG E and CHINA WATER 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 CHINA WATER. Check out your portfolio center. Please also check ongoing floating volatility patterns of PG E and CHINA WATER.
Diversification Opportunities for PG E and CHINA WATER
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between PCG6 and CHINA is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding PG E P6 and CHINA WATER IGR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA WATER IGR 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 CHINA WATER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA WATER IGR has no effect on the direction of PG E i.e., PG E and CHINA WATER go up and down completely randomly.
Pair Corralation between PG E and CHINA WATER
Assuming the 90 days trading horizon PG E P6 is expected to generate 0.11 times more return on investment than CHINA WATER. However, PG E P6 is 9.52 times less risky than CHINA WATER. It trades about 0.1 of its potential returns per unit of risk. CHINA WATER IGR is currently generating about -0.12 per unit of risk. If you would invest 2,044 in PG E P6 on September 25, 2024 and sell it today you would earn a total of 136.00 from holding PG E P6 or generate 6.65% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
PG E P6 vs. CHINA WATER IGR
Performance |
Timeline |
PG E P6 |
CHINA WATER IGR |
PG E and CHINA WATER Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with PG E and CHINA WATER
The main advantage of trading using opposite PG E and CHINA WATER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PG E position performs unexpectedly, CHINA WATER 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 CHINA WATER will offset losses from the drop in CHINA WATER's long position.The idea behind PG E P6 and CHINA WATER IGR 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.CHINA WATER vs. Apple Inc | CHINA WATER vs. Apple Inc | CHINA WATER vs. Apple Inc | CHINA WATER vs. Apple Inc |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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