Correlation Between China Shenhua and China Minsh
Can any of the company-specific risk be diversified away by investing in both China Shenhua and China Minsh 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 Shenhua and China Minsh into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Shenhua Energy and China Minsh, you can compare the effects of market volatilities on China Shenhua and China Minsh 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 Shenhua with a short position of China Minsh. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Shenhua and China Minsh.
Diversification Opportunities for China Shenhua and China Minsh
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and China is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding China Shenhua Energy and China Minsh in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Minsh and China Shenhua 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 Shenhua Energy are associated (or correlated) with China Minsh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Minsh has no effect on the direction of China Shenhua i.e., China Shenhua and China Minsh go up and down completely randomly.
Pair Corralation between China Shenhua and China Minsh
Assuming the 90 days horizon China Shenhua Energy is expected to generate 1.21 times more return on investment than China Minsh. However, China Shenhua is 1.21 times more volatile than China Minsh. It trades about -0.06 of its potential returns per unit of risk. China Minsh is currently generating about -0.07 per unit of risk. If you would invest 1,755 in China Shenhua Energy on August 29, 2024 and sell it today you would lose (68.00) from holding China Shenhua Energy or give up 3.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
China Shenhua Energy vs. China Minsh
Performance |
| Timeline |
| China Shenhua Energy |
| China Minsh |
China Shenhua and China Minsh Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Shenhua and China Minsh
The main advantage of trading using opposite China Shenhua and China Minsh positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Shenhua position performs unexpectedly, China Minsh 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 Minsh will offset losses from the drop in China Minsh's long position.| China Shenhua vs. Alliance Resource Partners | China Shenhua vs. Astera Labs, Common | China Shenhua vs. Autodesk | China Shenhua vs. Applied Blockchain |
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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