Correlation Between China Petrochemical and Shinkong Synthetic
Can any of the company-specific risk be diversified away by investing in both China Petrochemical and Shinkong Synthetic 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 Shinkong Synthetic 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 Shinkong Synthetic Fiber, you can compare the effects of market volatilities on China Petrochemical and Shinkong Synthetic 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 Shinkong Synthetic. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Petrochemical and Shinkong Synthetic.
Diversification Opportunities for China Petrochemical and Shinkong Synthetic
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between China and Shinkong is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding China Petrochemical Developmen and Shinkong Synthetic Fiber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinkong Synthetic Fiber 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 Shinkong Synthetic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinkong Synthetic Fiber has no effect on the direction of China Petrochemical i.e., China Petrochemical and Shinkong Synthetic go up and down completely randomly.
Pair Corralation between China Petrochemical and Shinkong Synthetic
Assuming the 90 days trading horizon China Petrochemical Development is expected to under-perform the Shinkong Synthetic. In addition to that, China Petrochemical is 1.13 times more volatile than Shinkong Synthetic Fiber. It trades about -0.03 of its total potential returns per unit of risk. Shinkong Synthetic Fiber is currently generating about -0.01 per unit of volatility. If you would invest 1,775 in Shinkong Synthetic Fiber on August 25, 2024 and sell it today you would lose (205.00) from holding Shinkong Synthetic Fiber or give up 11.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Petrochemical Developmen vs. Shinkong Synthetic Fiber
Performance |
| Timeline |
| China Petrochemical |
| Shinkong Synthetic Fiber |
China Petrochemical and Shinkong Synthetic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Petrochemical and Shinkong Synthetic
The main advantage of trading using opposite China Petrochemical and Shinkong Synthetic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Petrochemical position performs unexpectedly, Shinkong Synthetic 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 Shinkong Synthetic will offset losses from the drop in Shinkong Synthetic's long position.| China Petrochemical vs. USI Corp | China Petrochemical vs. Grand Pacific Petrochemical | China Petrochemical vs. Taiwan Styrene Monomer | China Petrochemical vs. China Steel Corp |
| Shinkong Synthetic vs. Tainan Spinning Co | Shinkong Synthetic vs. Lealea Enterprise Co | Shinkong Synthetic vs. China Petrochemical Development | Shinkong Synthetic vs. Taiwan Styrene Monomer |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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