Correlation Between Gas Natural and China Gas

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

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

Diversification Opportunities for Gas Natural and China Gas

-0.17
  Correlation Coefficient
Gas Natural Sdg
China Gas Hlds

Good diversification

The 3 months correlation between GASNF and China is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Gas Natural Sdg and China Gas Hlds in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on China Gas Hlds and Gas Natural 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 Gas Natural Sdg are associated (or correlated) with China Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Gas Hlds has no effect on the direction of Gas Natural i.e., Gas Natural and China Gas go up and down completely randomly.

Pair Corralation between Gas Natural and China Gas

Assuming the 90 days horizon Gas Natural Sdg is expected to generate 1.48 times more return on investment than China Gas. However, Gas Natural is 1.48 times more volatile than China Gas Hlds. It trades about 0.02 of its potential returns per unit of risk. China Gas Hlds is currently generating about -0.01 per unit of risk. If you would invest  2,610  in Gas Natural Sdg on May 5, 2021 and sell it today you would lose (45.00)  from holding Gas Natural Sdg or give up 1.72% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

Gas Natural Sdg  vs.  China Gas Hlds

 Performance (%) 
      Timeline 
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 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 September 2021. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

China Price Channel

Gas Natural and China Gas Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Gas Natural and China Gas

The main advantage of trading using opposite Gas Natural and China Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gas Natural position performs unexpectedly, China Gas 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 Gas will offset losses from the drop in China Gas' long position.
The idea behind Gas Natural Sdg and China Gas Hlds 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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