Correlation Between China Petrochemical and China General
Can any of the company-specific risk be diversified away by investing in both China Petrochemical and China General 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 China General 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 China General Plastics, you can compare the effects of market volatilities on China Petrochemical and China General 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 China General. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Petrochemical and China General.
Diversification Opportunities for China Petrochemical and China General
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and China is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding China Petrochemical Developmen and China General Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China General 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 China General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China General Plastics has no effect on the direction of China Petrochemical i.e., China Petrochemical and China General go up and down completely randomly.
Pair Corralation between China Petrochemical and China General
Assuming the 90 days trading horizon China Petrochemical Development is expected to generate 0.92 times more return on investment than China General. However, China Petrochemical Development is 1.08 times less risky than China General. It trades about -0.02 of its potential returns per unit of risk. China General Plastics is currently generating about -0.09 per unit of risk. If you would invest 922.00 in China Petrochemical Development on September 12, 2024 and sell it today you would lose (119.00) from holding China Petrochemical Development or give up 12.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Petrochemical Developmen vs. China General Plastics
Performance |
| Timeline |
| China Petrochemical |
| China General Plastics |
China Petrochemical and China General Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Petrochemical and China General
The main advantage of trading using opposite China Petrochemical and China General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Petrochemical position performs unexpectedly, China General 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 General will offset losses from the drop in China General's long position.| China Petrochemical vs. Tainan Spinning Co | China Petrochemical vs. Lealea Enterprise Co | China Petrochemical vs. Ruentex Development Co | China Petrochemical vs. WiseChip Semiconductor |
| China General vs. Tainan Spinning Co | China General vs. Lealea Enterprise Co | China General vs. China Petrochemical Development | China General vs. Ruentex Development Co |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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