Correlation Between Shanghai Electric and Vestas Wind
Can any of the company-specific risk be diversified away by investing in both Shanghai Electric and Vestas Wind 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 Shanghai Electric and Vestas Wind into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shanghai Electric Group and Vestas Wind Systems, you can compare the effects of market volatilities on Shanghai Electric and Vestas Wind 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 Shanghai Electric with a short position of Vestas Wind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Electric and Vestas Wind.
Diversification Opportunities for Shanghai Electric and Vestas Wind
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Shanghai and Vestas is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Electric Group and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems and Shanghai Electric 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 Shanghai Electric Group are associated (or correlated) with Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of Shanghai Electric i.e., Shanghai Electric and Vestas Wind go up and down completely randomly.
Pair Corralation between Shanghai Electric and Vestas Wind
Assuming the 90 days horizon Shanghai Electric Group is expected to generate 1.81 times more return on investment than Vestas Wind. However, Shanghai Electric is 1.81 times more volatile than Vestas Wind Systems. It trades about 0.04 of its potential returns per unit of risk. Vestas Wind Systems is currently generating about -0.05 per unit of risk. If you would invest 466.00 in Shanghai Electric Group on September 1, 2024 and sell it today you would earn a total of 297.00 from holding Shanghai Electric Group or generate 63.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.78% |
| Values | Daily Returns |
Shanghai Electric Group vs. Vestas Wind Systems
Performance |
| Timeline |
| Shanghai Electric |
| Vestas Wind Systems |
Shanghai Electric and Vestas Wind Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shanghai Electric and Vestas Wind
The main advantage of trading using opposite Shanghai Electric and Vestas Wind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanghai Electric position performs unexpectedly, Vestas Wind 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 Vestas Wind will offset losses from the drop in Vestas Wind's long position.| Shanghai Electric vs. Xinjiang Goldwind Science | Shanghai Electric vs. American Superconductor | Shanghai Electric vs. Cummins |
| Vestas Wind vs. Kone Oyj ADR | Vestas Wind vs. Schneider Electric SE | Vestas Wind vs. Schneider Electric SA | Vestas Wind vs. Fanuc |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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