Correlation Between Rongsheng Petrochemical and Puyang Huicheng
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By analyzing existing cross correlation between Rongsheng Petrochemical Co and Puyang Huicheng Electronic, you can compare the effects of market volatilities on Rongsheng Petrochemical and Puyang Huicheng 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 Puyang Huicheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rongsheng Petrochemical and Puyang Huicheng.
Diversification Opportunities for Rongsheng Petrochemical and Puyang Huicheng
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rongsheng and Puyang is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Rongsheng Petrochemical Co and Puyang Huicheng Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Puyang Huicheng Elec 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 Puyang Huicheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Puyang Huicheng Elec has no effect on the direction of Rongsheng Petrochemical i.e., Rongsheng Petrochemical and Puyang Huicheng go up and down completely randomly.
Pair Corralation between Rongsheng Petrochemical and Puyang Huicheng
Assuming the 90 days trading horizon Rongsheng Petrochemical Co is expected to under-perform the Puyang Huicheng. But the stock apears to be less risky and, when comparing its historical volatility, Rongsheng Petrochemical Co is 1.89 times less risky than Puyang Huicheng. The stock trades about -0.02 of its potential returns per unit of risk. The Puyang Huicheng Electronic is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,131 in Puyang Huicheng Electronic on November 3, 2024 and sell it today you would earn a total of 329.00 from holding Puyang Huicheng Electronic or generate 29.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rongsheng Petrochemical Co vs. Puyang Huicheng Electronic
Performance |
| Timeline |
| Rongsheng Petrochemical |
| Puyang Huicheng Elec |
Rongsheng Petrochemical and Puyang Huicheng Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rongsheng Petrochemical and Puyang Huicheng
The main advantage of trading using opposite Rongsheng Petrochemical and Puyang Huicheng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rongsheng Petrochemical position performs unexpectedly, Puyang Huicheng 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 Puyang Huicheng will offset losses from the drop in Puyang Huicheng's long position.The idea behind Rongsheng Petrochemical Co and Puyang Huicheng Electronic 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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