Correlation Between China Longyuan and Tidewater Renewables
Can any of the company-specific risk be diversified away by investing in both China Longyuan and Tidewater Renewables 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 Longyuan and Tidewater Renewables into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Longyuan Power and Tidewater Renewables, you can compare the effects of market volatilities on China Longyuan and Tidewater Renewables 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 Longyuan with a short position of Tidewater Renewables. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Longyuan and Tidewater Renewables.
Diversification Opportunities for China Longyuan and Tidewater Renewables
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between China and Tidewater is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding China Longyuan Power and Tidewater Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tidewater Renewables and China Longyuan 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 Longyuan Power are associated (or correlated) with Tidewater Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tidewater Renewables has no effect on the direction of China Longyuan i.e., China Longyuan and Tidewater Renewables go up and down completely randomly.
Pair Corralation between China Longyuan and Tidewater Renewables
Assuming the 90 days horizon China Longyuan Power is expected to generate 0.37 times more return on investment than Tidewater Renewables. However, China Longyuan Power is 2.68 times less risky than Tidewater Renewables. It trades about -0.13 of its potential returns per unit of risk. Tidewater Renewables is currently generating about -0.09 per unit of risk. If you would invest 106.00 in China Longyuan Power on August 31, 2024 and sell it today you would lose (8.00) from holding China Longyuan Power or give up 7.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 8.58% |
| Values | Daily Returns |
China Longyuan Power vs. Tidewater Renewables
Performance |
| Timeline |
| China Longyuan Power |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Tidewater Renewables |
China Longyuan and Tidewater Renewables Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Longyuan and Tidewater Renewables
The main advantage of trading using opposite China Longyuan and Tidewater Renewables positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Longyuan position performs unexpectedly, Tidewater Renewables 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 Tidewater Renewables will offset losses from the drop in Tidewater Renewables' long position.| China Longyuan vs. Enlight Renewable Energy | China Longyuan vs. Clearway Energy Class | China Longyuan vs. Constellation Energy Corp |
| Tidewater Renewables vs. Northland Power | Tidewater Renewables vs. Renew Energy Global | Tidewater Renewables vs. Clearway Energy | Tidewater Renewables vs. Clearway Energy Class |
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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