Correlation Between Oceanic Beverages and China Petrochemical
Can any of the company-specific risk be diversified away by investing in both Oceanic Beverages and China Petrochemical 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 Oceanic Beverages and China Petrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oceanic Beverages Co and China Petrochemical Development, you can compare the effects of market volatilities on Oceanic Beverages and China Petrochemical 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 Oceanic Beverages with a short position of China Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oceanic Beverages and China Petrochemical.
Diversification Opportunities for Oceanic Beverages and China Petrochemical
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Oceanic and China is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Oceanic Beverages Co and China Petrochemical Developmen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Petrochemical and Oceanic Beverages 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 Oceanic Beverages Co are associated (or correlated) with China Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Petrochemical has no effect on the direction of Oceanic Beverages i.e., Oceanic Beverages and China Petrochemical go up and down completely randomly.
Pair Corralation between Oceanic Beverages and China Petrochemical
Assuming the 90 days trading horizon Oceanic Beverages Co is expected to generate 2.18 times more return on investment than China Petrochemical. However, Oceanic Beverages is 2.18 times more volatile than China Petrochemical Development. It trades about 0.12 of its potential returns per unit of risk. China Petrochemical Development is currently generating about -0.09 per unit of risk. If you would invest 1,230 in Oceanic Beverages Co on November 2, 2024 and sell it today you would earn a total of 260.00 from holding Oceanic Beverages Co or generate 21.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oceanic Beverages Co vs. China Petrochemical Developmen
Performance |
| Timeline |
| Oceanic Beverages |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| China Petrochemical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Oceanic Beverages and China Petrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oceanic Beverages and China Petrochemical
The main advantage of trading using opposite Oceanic Beverages and China Petrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oceanic Beverages position performs unexpectedly, China Petrochemical 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 Petrochemical will offset losses from the drop in China Petrochemical's long position.The idea behind Oceanic Beverages Co and China Petrochemical Development 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 the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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