Correlation Between Rongsheng Petrochemical and Zhejiang Yongjin
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By analyzing existing cross correlation between Rongsheng Petrochemical Co and Zhejiang Yongjin Metal, you can compare the effects of market volatilities on Rongsheng Petrochemical and Zhejiang Yongjin 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 Zhejiang Yongjin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rongsheng Petrochemical and Zhejiang Yongjin.
Diversification Opportunities for Rongsheng Petrochemical and Zhejiang Yongjin
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Rongsheng and Zhejiang is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Rongsheng Petrochemical Co and Zhejiang Yongjin Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Yongjin Metal 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 Zhejiang Yongjin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Yongjin Metal has no effect on the direction of Rongsheng Petrochemical i.e., Rongsheng Petrochemical and Zhejiang Yongjin go up and down completely randomly.
Pair Corralation between Rongsheng Petrochemical and Zhejiang Yongjin
Assuming the 90 days trading horizon Rongsheng Petrochemical is expected to generate 28.98 times less return on investment than Zhejiang Yongjin. But when comparing it to its historical volatility, Rongsheng Petrochemical Co is 1.24 times less risky than Zhejiang Yongjin. It trades about 0.02 of its potential returns per unit of risk. Zhejiang Yongjin Metal is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 1,800 in Zhejiang Yongjin Metal on November 4, 2024 and sell it today you would earn a total of 215.00 from holding Zhejiang Yongjin Metal or generate 11.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rongsheng Petrochemical Co vs. Zhejiang Yongjin Metal
Performance |
| Timeline |
| Rongsheng Petrochemical |
| Zhejiang Yongjin Metal |
Rongsheng Petrochemical and Zhejiang Yongjin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rongsheng Petrochemical and Zhejiang Yongjin
The main advantage of trading using opposite Rongsheng Petrochemical and Zhejiang Yongjin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rongsheng Petrochemical position performs unexpectedly, Zhejiang Yongjin 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 Zhejiang Yongjin will offset losses from the drop in Zhejiang Yongjin's long position.The idea behind Rongsheng Petrochemical Co and Zhejiang Yongjin Metal 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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