Correlation Between China Resources and Naturgy Energy
Can any of the company-specific risk be diversified away by investing in both China Resources and Naturgy 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 Resources and Naturgy Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Resources Gas and Naturgy Energy Group, you can compare the effects of market volatilities on China Resources and Naturgy 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 Resources with a short position of Naturgy Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and Naturgy Energy.
Diversification Opportunities for China Resources and Naturgy Energy
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between China and Naturgy is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Gas and Naturgy Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naturgy Energy Group 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 Gas are associated (or correlated) with Naturgy Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naturgy Energy Group has no effect on the direction of China Resources i.e., China Resources and Naturgy Energy go up and down completely randomly.
Pair Corralation between China Resources and Naturgy Energy
Assuming the 90 days trading horizon China Resources Gas is expected to under-perform the Naturgy Energy. In addition to that, China Resources is 1.6 times more volatile than Naturgy Energy Group. It trades about -0.21 of its total potential returns per unit of risk. Naturgy Energy Group is currently generating about 0.21 per unit of volatility. If you would invest 2,270 in Naturgy Energy Group on October 20, 2024 and sell it today you would earn a total of 94.00 from holding Naturgy Energy Group or generate 4.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Resources Gas vs. Naturgy Energy Group
Performance |
| Timeline |
| China Resources Gas |
| Naturgy Energy Group |
China Resources and Naturgy Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and Naturgy Energy
The main advantage of trading using opposite China Resources and Naturgy Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources position performs unexpectedly, Naturgy 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 Naturgy Energy will offset losses from the drop in Naturgy Energy's long position.| China Resources vs. Naturgy Energy Group | China Resources vs. CenterPoint Energy | China Resources vs. Snam SpA | China Resources vs. ENN Energy Holdings |
| Naturgy Energy vs. CenterPoint Energy | Naturgy Energy vs. Snam SpA | Naturgy Energy vs. ENN Energy Holdings | Naturgy Energy vs. ENN Energy Holdings |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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