Correlation Between Rongsheng Petrochemical and Ningxia Younglight
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By analyzing existing cross correlation between Rongsheng Petrochemical Co and Ningxia Younglight Chemicals, you can compare the effects of market volatilities on Rongsheng Petrochemical and Ningxia Younglight 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 Rongsheng Petrochemical with a short position of Ningxia Younglight. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rongsheng Petrochemical and Ningxia Younglight.
Diversification Opportunities for Rongsheng Petrochemical and Ningxia Younglight
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rongsheng and Ningxia is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Rongsheng Petrochemical Co and Ningxia Younglight Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningxia Younglight and Rongsheng Petrochemical 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 Rongsheng Petrochemical Co are associated (or correlated) with Ningxia Younglight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningxia Younglight has no effect on the direction of Rongsheng Petrochemical i.e., Rongsheng Petrochemical and Ningxia Younglight go up and down completely randomly.
Pair Corralation between Rongsheng Petrochemical and Ningxia Younglight
Assuming the 90 days trading horizon Rongsheng Petrochemical Co is expected to generate 0.45 times more return on investment than Ningxia Younglight. However, Rongsheng Petrochemical Co is 2.2 times less risky than Ningxia Younglight. It trades about -0.25 of its potential returns per unit of risk. Ningxia Younglight Chemicals is currently generating about -0.31 per unit of risk. If you would invest 922.00 in Rongsheng Petrochemical Co on October 25, 2024 and sell it today you would lose (68.00) from holding Rongsheng Petrochemical Co or give up 7.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rongsheng Petrochemical Co vs. Ningxia Younglight Chemicals
Performance |
| Timeline |
| Rongsheng Petrochemical |
| Ningxia Younglight |
Rongsheng Petrochemical and Ningxia Younglight Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rongsheng Petrochemical and Ningxia Younglight
The main advantage of trading using opposite Rongsheng Petrochemical and Ningxia Younglight positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rongsheng Petrochemical position performs unexpectedly, Ningxia Younglight 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 Ningxia Younglight will offset losses from the drop in Ningxia Younglight's long position.The idea behind Rongsheng Petrochemical Co and Ningxia Younglight Chemicals 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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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 Stocks Directory module to find actively traded stocks across global markets.
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