Correlation Between China Gas and Gas Natural

By analyzing existing cross correlation between China Gas Hlds and Gas Natural Sdg, you can compare the effects of market volatilities on China Gas and Gas Natural 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 Gas with a short position of Gas Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Gas and Gas Natural.

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Can any of the company-specific risk be diversified away by investing in both China Gas and Gas Natural 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 Gas and Gas Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.

Diversification Opportunities for China Gas and Gas Natural

-0.27
  Correlation Coefficient
China Gas Hlds
Gas Natural Sdg

Very good diversification

The 3 months correlation between China and GASNF is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding China Gas Hlds and Gas Natural Sdg in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Gas Natural Sdg and China Gas 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 Gas Hlds are associated (or correlated) with Gas Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gas Natural Sdg has no effect on the direction of China Gas i.e., China Gas and Gas Natural go up and down completely randomly.

Pair Corralation between China Gas and Gas Natural

Assuming the 90 days horizon China Gas Hlds is expected to under-perform the Gas Natural. In addition to that, China Gas is 1.79 times more volatile than Gas Natural Sdg. It trades about -0.07 of its total potential returns per unit of risk. Gas Natural Sdg is currently generating about 0.08 per unit of volatility. If you would invest  2,256  in Gas Natural Sdg on May 1, 2021 and sell it today you would earn a total of  309.00  from holding Gas Natural Sdg or generate 13.7% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

China Gas Hlds  vs.  Gas Natural Sdg

 Performance (%) 
      Timeline 
China Gas Hlds 
 China Performance
0 of 100
Over the last 90 days China Gas Hlds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in August 2021. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

China Price Channel

Gas Natural Sdg 
 GASNF Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Gas Natural Sdg are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Gas Natural is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

GASNF Price Channel

China Gas and Gas Natural Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with China Gas and Gas Natural

The main advantage of trading using opposite China Gas and Gas Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Gas position performs unexpectedly, Gas Natural 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 Gas Natural will offset losses from the drop in Gas Natural's long position.
The idea behind China Gas Hlds and Gas Natural Sdg 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.
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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