Correlation Between China Petrochemical and Nan Ya
Can any of the company-specific risk be diversified away by investing in both China Petrochemical and Nan Ya 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 China Petrochemical and Nan Ya into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Petrochemical Development and Nan Ya Plastics, you can compare the effects of market volatilities on China Petrochemical and Nan Ya 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 China Petrochemical with a short position of Nan Ya. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Petrochemical and Nan Ya.
Diversification Opportunities for China Petrochemical and Nan Ya
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between China and Nan is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding China Petrochemical Developmen and Nan Ya Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nan Ya Plastics and China 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 China Petrochemical Development are associated (or correlated) with Nan Ya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nan Ya Plastics has no effect on the direction of China Petrochemical i.e., China Petrochemical and Nan Ya go up and down completely randomly.
Pair Corralation between China Petrochemical and Nan Ya
Assuming the 90 days trading horizon China Petrochemical Development is expected to under-perform the Nan Ya. But the stock apears to be less risky and, when comparing its historical volatility, China Petrochemical Development is 1.41 times less risky than Nan Ya. The stock trades about -0.08 of its potential returns per unit of risk. The Nan Ya Plastics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3,100 in Nan Ya Plastics on October 28, 2024 and sell it today you would earn a total of 135.00 from holding Nan Ya Plastics or generate 4.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Petrochemical Developmen vs. Nan Ya Plastics
Performance |
| Timeline |
| China Petrochemical |
| Nan Ya Plastics |
China Petrochemical and Nan Ya Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Petrochemical and Nan Ya
The main advantage of trading using opposite China Petrochemical and Nan Ya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Petrochemical position performs unexpectedly, Nan Ya 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 Nan Ya will offset losses from the drop in Nan Ya's long position.| China Petrochemical vs. Nan Ya Plastics | China Petrochemical vs. Formosa Chemicals Fibre | China Petrochemical vs. China Steel Corp | China Petrochemical vs. Formosa Petrochemical Corp |
| Nan Ya vs. Formosa Plastics Corp | Nan Ya vs. Formosa Chemicals Fibre | Nan Ya vs. China Steel Corp | Nan Ya vs. Formosa Petrochemical 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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