Correlation Between USI Corp and China Petrochemical
Can any of the company-specific risk be diversified away by investing in both USI Corp 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 USI Corp and China Petrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between USI Corp and China Petrochemical Development, you can compare the effects of market volatilities on USI Corp 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 USI Corp with a short position of China Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of USI Corp and China Petrochemical.
Diversification Opportunities for USI Corp and China Petrochemical
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between USI and China is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding USI Corp and China Petrochemical Developmen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Petrochemical and USI Corp 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 USI Corp 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 USI Corp i.e., USI Corp and China Petrochemical go up and down completely randomly.
Pair Corralation between USI Corp and China Petrochemical
Assuming the 90 days trading horizon USI Corp is expected to under-perform the China Petrochemical. In addition to that, USI Corp is 1.03 times more volatile than China Petrochemical Development. It trades about -0.07 of its total potential returns per unit of risk. China Petrochemical Development is currently generating about -0.04 per unit of volatility. If you would invest 1,025 in China Petrochemical Development on August 25, 2024 and sell it today you would lose (212.00) from holding China Petrochemical Development or give up 20.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
USI Corp vs. China Petrochemical Developmen
Performance |
| Timeline |
| USI Corp |
| China Petrochemical |
USI Corp and China Petrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with USI Corp and China Petrochemical
The main advantage of trading using opposite USI Corp and China Petrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if USI Corp 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.| USI Corp vs. Asia Polymer Corp | USI Corp vs. Taiwan Styrene Monomer | USI Corp vs. UPC Technology Corp | USI Corp vs. China Petrochemical Development |
| China Petrochemical vs. USI Corp | China Petrochemical vs. Grand Pacific Petrochemical | China Petrochemical vs. Taiwan Styrene Monomer | China Petrochemical vs. China Steel Corp |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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