Correlation Between China Longyuan and Orsted A/S
Can any of the company-specific risk be diversified away by investing in both China Longyuan and Orsted A/S 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 Orsted A/S 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 Orsted AS, you can compare the effects of market volatilities on China Longyuan and Orsted A/S 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 Orsted A/S. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Longyuan and Orsted A/S.
Diversification Opportunities for China Longyuan and Orsted A/S
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between China and Orsted is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding China Longyuan Power and Orsted AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orsted A/S 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 Orsted A/S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orsted A/S has no effect on the direction of China Longyuan i.e., China Longyuan and Orsted A/S go up and down completely randomly.
Pair Corralation between China Longyuan and Orsted A/S
Assuming the 90 days horizon China Longyuan Power is expected to generate 0.55 times more return on investment than Orsted A/S. However, China Longyuan Power is 1.81 times less risky than Orsted A/S. It trades about -0.14 of its potential returns per unit of risk. Orsted AS is currently generating about -0.21 per unit of risk. If you would invest 785.00 in China Longyuan Power on November 4, 2024 and sell it today you would lose (53.00) from holding China Longyuan Power or give up 6.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Longyuan Power vs. Orsted AS
Performance |
| Timeline |
| China Longyuan Power |
| Orsted A/S |
China Longyuan and Orsted A/S Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Longyuan and Orsted A/S
The main advantage of trading using opposite China Longyuan and Orsted A/S positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Longyuan position performs unexpectedly, Orsted A/S 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 Orsted A/S will offset losses from the drop in Orsted A/S's long position.| China Longyuan vs. Clearway Energy | China Longyuan vs. Brookfield Renewable Corp | China Longyuan vs. Nextera Energy Partners | China Longyuan vs. Brookfield Renewable Partners |
| Orsted A/S vs. Innergex Renewable Energy | Orsted A/S vs. Clearway Energy | Orsted A/S vs. Fusion Fuel Green | Orsted A/S vs. Powertap Hydrogen Capital |
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 CEOs Directory module to screen CEOs from public companies around the world.
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