Correlation Between China Energy and WSP Global
Can any of the company-specific risk be diversified away by investing in both China Energy and WSP Global 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 China Energy and WSP Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Energy Engineering and WSP Global, you can compare the effects of market volatilities on China Energy and WSP Global 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 China Energy with a short position of WSP Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Energy and WSP Global.
Diversification Opportunities for China Energy and WSP Global
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between China and WSP is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding China Energy Engineering and WSP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WSP Global and China Energy 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 China Energy Engineering are associated (or correlated) with WSP Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WSP Global has no effect on the direction of China Energy i.e., China Energy and WSP Global go up and down completely randomly.
Pair Corralation between China Energy and WSP Global
Assuming the 90 days horizon China Energy Engineering is expected to generate 3.97 times more return on investment than WSP Global. However, China Energy is 3.97 times more volatile than WSP Global. It trades about 0.12 of its potential returns per unit of risk. WSP Global is currently generating about 0.12 per unit of risk. If you would invest 10.00 in China Energy Engineering on August 28, 2024 and sell it today you would earn a total of 2.00 from holding China Energy Engineering or generate 20.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Energy Engineering vs. WSP Global
Performance |
| Timeline |
| China Energy Engineering |
| WSP Global |
China Energy and WSP Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Energy and WSP Global
The main advantage of trading using opposite China Energy and WSP Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Energy position performs unexpectedly, WSP Global 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 WSP Global will offset losses from the drop in WSP Global's long position.| China Energy vs. China Railway Construction | China Energy vs. AECOM | China Energy vs. Superior Plus Corp | China Energy vs. NMI Holdings |
| WSP Global vs. China Railway Construction | WSP Global vs. AECOM | WSP Global vs. Superior Plus Corp | WSP Global vs. NMI Holdings |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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