Correlation Between China Shenhua and Geo Energy
Can any of the company-specific risk be diversified away by investing in both China Shenhua and Geo Energy 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 Geo Energy 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 Geo Energy Resources, you can compare the effects of market volatilities on China Shenhua and Geo Energy 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 Geo Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Shenhua and Geo Energy.
Diversification Opportunities for China Shenhua and Geo Energy
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Geo is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding China Shenhua Energy and Geo Energy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geo Energy Resources 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 Geo Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geo Energy Resources has no effect on the direction of China Shenhua i.e., China Shenhua and Geo Energy go up and down completely randomly.
Pair Corralation between China Shenhua and Geo Energy
Assuming the 90 days horizon China Shenhua Energy is expected to generate 0.58 times more return on investment than Geo Energy. However, China Shenhua Energy is 1.71 times less risky than Geo Energy. It trades about 0.21 of its potential returns per unit of risk. Geo Energy Resources is currently generating about -0.21 per unit of risk. If you would invest 420.00 in China Shenhua Energy on August 31, 2024 and sell it today you would earn a total of 35.00 from holding China Shenhua Energy or generate 8.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Shenhua Energy vs. Geo Energy Resources
Performance |
| Timeline |
| China Shenhua Energy |
| Geo Energy Resources |
China Shenhua and Geo Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Shenhua and Geo Energy
The main advantage of trading using opposite China Shenhua and Geo Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Shenhua position performs unexpectedly, Geo Energy 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 Geo Energy will offset losses from the drop in Geo Energy's long position.| China Shenhua vs. Bukit Asam Tbk | China Shenhua vs. Indo Tambangraya Megah | China Shenhua vs. Thungela Resources Limited |
| Geo Energy vs. Indo Tambangraya Megah | Geo Energy vs. Adaro Energy Tbk | Geo Energy vs. Thungela Resources Limited | Geo Energy vs. China Coal Energy |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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