Correlation Between Vestas Wind and Weichai Power
Can any of the company-specific risk be diversified away by investing in both Vestas Wind and Weichai Power 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 Vestas Wind and Weichai Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vestas Wind Systems and Weichai Power Co, you can compare the effects of market volatilities on Vestas Wind and Weichai Power 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 Vestas Wind with a short position of Weichai Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vestas Wind and Weichai Power.
Diversification Opportunities for Vestas Wind and Weichai Power
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vestas and Weichai is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Vestas Wind Systems and Weichai Power Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weichai Power and Vestas Wind 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 Vestas Wind Systems are associated (or correlated) with Weichai Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weichai Power has no effect on the direction of Vestas Wind i.e., Vestas Wind and Weichai Power go up and down completely randomly.
Pair Corralation between Vestas Wind and Weichai Power
Assuming the 90 days horizon Vestas Wind Systems is expected to under-perform the Weichai Power. But the pink sheet apears to be less risky and, when comparing its historical volatility, Vestas Wind Systems is 1.48 times less risky than Weichai Power. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Weichai Power Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 143.00 in Weichai Power Co on September 1, 2024 and sell it today you would earn a total of 18.00 from holding Weichai Power Co or generate 12.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 45.49% |
| Values | Daily Returns |
Vestas Wind Systems vs. Weichai Power Co
Performance |
| Timeline |
| Vestas Wind Systems |
| Weichai Power |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
Vestas Wind and Weichai Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vestas Wind and Weichai Power
The main advantage of trading using opposite Vestas Wind and Weichai Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vestas Wind position performs unexpectedly, Weichai Power 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 Weichai Power will offset losses from the drop in Weichai Power's long position.| Vestas Wind vs. Kone Oyj ADR | Vestas Wind vs. Schneider Electric SE | Vestas Wind vs. Schneider Electric SA | Vestas Wind vs. Fanuc |
| Weichai Power vs. Xinjiang Goldwind Science | Weichai Power vs. Shanghai Electric Group | Weichai Power vs. American Superconductor | Weichai Power vs. Cummins |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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