Correlation Between PGE and China Datang
Can any of the company-specific risk be diversified away by investing in both PGE and China Datang 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 PGE and China Datang into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PGE Corporation and China Datang, you can compare the effects of market volatilities on PGE and China Datang 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 PGE with a short position of China Datang. Check out your portfolio center. Please also check ongoing floating volatility patterns of PGE and China Datang.
Diversification Opportunities for PGE and China Datang
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between PGE and China is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding PGE Corp. and China Datang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Datang and PGE 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 PGE Corporation are associated (or correlated) with China Datang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Datang has no effect on the direction of PGE i.e., PGE and China Datang go up and down completely randomly.
Pair Corralation between PGE and China Datang
Assuming the 90 days horizon PGE Corporation is expected to under-perform the China Datang. In addition to that, PGE is 1.06 times more volatile than China Datang. It trades about -0.23 of its total potential returns per unit of risk. China Datang is currently generating about 0.1 per unit of volatility. If you would invest 23.00 in China Datang on October 26, 2024 and sell it today you would earn a total of 2.00 from holding China Datang or generate 8.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.5% |
| Values | Daily Returns |
PGE Corp. vs. China Datang
Performance |
| Timeline |
| PGE Corporation |
| China Datang |
PGE and China Datang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PGE and China Datang
The main advantage of trading using opposite PGE and China Datang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PGE position performs unexpectedly, China Datang 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 Datang will offset losses from the drop in China Datang's long position.The idea behind PGE Corporation and China Datang pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| China Datang vs. NextEra Energy | China Datang vs. The Southern | China Datang vs. VERBUND AG | China Datang vs. PGE Corporation |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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