Correlation Between China Resources and Huaneng Power
Can any of the company-specific risk be diversified away by investing in both China Resources and Huaneng Power 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 Resources and Huaneng Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Resources Power and Huaneng Power International, you can compare the effects of market volatilities on China Resources and Huaneng Power 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 Resources with a short position of Huaneng Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and Huaneng Power.
Diversification Opportunities for China Resources and Huaneng Power
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between China and Huaneng is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Power and Huaneng Power International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaneng Power Intern and China Resources 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 Resources Power are associated (or correlated) with Huaneng Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaneng Power Intern has no effect on the direction of China Resources i.e., China Resources and Huaneng Power go up and down completely randomly.
Pair Corralation between China Resources and Huaneng Power
Assuming the 90 days horizon China Resources is expected to generate 3.28 times less return on investment than Huaneng Power. But when comparing it to its historical volatility, China Resources Power is 1.81 times less risky than Huaneng Power. It trades about 0.02 of its potential returns per unit of risk. Huaneng Power International is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 44.00 in Huaneng Power International on September 26, 2024 and sell it today you would earn a total of 6.00 from holding Huaneng Power International or generate 13.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Resources Power vs. Huaneng Power International
Performance |
| Timeline |
| China Resources Power |
| Huaneng Power Intern |
China Resources and Huaneng Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and Huaneng Power
The main advantage of trading using opposite China Resources and Huaneng Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources position performs unexpectedly, Huaneng Power 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 Huaneng Power will offset losses from the drop in Huaneng Power's long position.| China Resources vs. Orsted AS | China Resources vs. EDP Renovveis SA | China Resources vs. CGN Power Co | China Resources vs. Huaneng Power International |
| Huaneng Power vs. DISTRICT METALS | Huaneng Power vs. TRAVEL LEISURE DL 01 | Huaneng Power vs. ANTA SPORTS PRODUCT | Huaneng Power vs. LG Display Co |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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