Correlation Between Energy Recovery and Sino Bioenergy

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

By analyzing existing cross correlation between Energy Recovery and Sino Bioenergy Corp, you can compare the effects of market volatilities on Energy Recovery and Sino Bioenergy 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 Energy Recovery with a short position of Sino Bioenergy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Recovery and Sino Bioenergy.

Diversification Opportunities for Energy Recovery and Sino Bioenergy

-0.63

Correlation Coefficient

Energy Recovery  Sino Bioenergy

Excellent diversification

The 3 months correlation between Energy and Sino is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Energy Recovery and Sino Bioenergy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sino Bioenergy Corp and Energy Recovery 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 Energy Recovery are associated (or correlated) with Sino Bioenergy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sino Bioenergy Corp has no effect on the direction of Energy Recovery i.e., Energy Recovery and Sino Bioenergy go up and down completely randomly.

Pair Corralation between Energy Recovery and Sino Bioenergy

Given the investment horizon of 90 days Energy Recovery is expected to under-perform the Sino Bioenergy. But the stock apears to be less risky and, when comparing its historical volatility, Energy Recovery is 7.72 times less risky than Sino Bioenergy. The stock trades about -0.11 of its potential returns per unit of risk. The Sino Bioenergy Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.04  in Sino Bioenergy Corp on February 5, 2024 and sell it today you would earn a total of  0.00  from holding Sino Bioenergy Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Energy Recovery  vs.  Sino Bioenergy Corp

Energy Recovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy Recovery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Energy Recovery is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Sino Bioenergy Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sino Bioenergy Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental drivers, Sino Bioenergy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Energy Recovery and Sino Bioenergy

The main advantage of trading using opposite Energy Recovery and Sino Bioenergy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Recovery position performs unexpectedly, Sino Bioenergy 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 Sino Bioenergy will offset losses from the drop in Sino Bioenergy's long position.

The idea behind Energy Recovery and Sino Bioenergy Corp 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.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.