Correlation Between CGN Power and China Resources
Can any of the company-specific risk be diversified away by investing in both CGN Power and China Resources 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 CGN Power and China Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CGN Power Co and China Resources Power, you can compare the effects of market volatilities on CGN Power and China Resources 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 CGN Power with a short position of China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of CGN Power and China Resources.
Diversification Opportunities for CGN Power and China Resources
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CGN and China is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding CGN Power Co and China Resources Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Power and CGN Power 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 CGN Power Co are associated (or correlated) with China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Power has no effect on the direction of CGN Power i.e., CGN Power and China Resources go up and down completely randomly.
Pair Corralation between CGN Power and China Resources
Assuming the 90 days horizon CGN Power Co is expected to generate 4.71 times more return on investment than China Resources. However, CGN Power is 4.71 times more volatile than China Resources Power. It trades about 0.06 of its potential returns per unit of risk. China Resources Power is currently generating about 0.02 per unit of risk. If you would invest 28.00 in CGN Power Co on September 26, 2024 and sell it today you would earn a total of 0.00 from holding CGN Power Co or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CGN Power Co vs. China Resources Power
Performance |
| Timeline |
| CGN Power |
| China Resources Power |
CGN Power and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CGN Power and China Resources
The main advantage of trading using opposite CGN Power and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CGN Power position performs unexpectedly, China Resources 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 Resources will offset losses from the drop in China Resources' long position.| CGN Power vs. Orsted AS | CGN Power vs. EDP Renovveis SA | CGN Power vs. Huaneng Power International | CGN Power vs. Power Assets Holdings |
| China Resources vs. Orsted AS | China Resources vs. EDP Renovveis SA | China Resources vs. CGN Power Co | China Resources vs. Huaneng Power International |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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