Correlation Between China Petrochemical and Lealea Enterprise
Can any of the company-specific risk be diversified away by investing in both China Petrochemical and Lealea Enterprise 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 Lealea Enterprise 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 Lealea Enterprise Co, you can compare the effects of market volatilities on China Petrochemical and Lealea Enterprise 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 Lealea Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Petrochemical and Lealea Enterprise.
Diversification Opportunities for China Petrochemical and Lealea Enterprise
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Lealea is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding China Petrochemical Developmen and Lealea Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lealea Enterprise 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 Lealea Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lealea Enterprise has no effect on the direction of China Petrochemical i.e., China Petrochemical and Lealea Enterprise go up and down completely randomly.
Pair Corralation between China Petrochemical and Lealea Enterprise
Assuming the 90 days trading horizon China Petrochemical Development is expected to generate 1.59 times more return on investment than Lealea Enterprise. However, China Petrochemical is 1.59 times more volatile than Lealea Enterprise Co. It trades about 0.07 of its potential returns per unit of risk. Lealea Enterprise Co is currently generating about 0.09 per unit of risk. If you would invest 818.00 in China Petrochemical Development on August 29, 2024 and sell it today you would earn a total of 15.00 from holding China Petrochemical Development or generate 1.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Petrochemical Developmen vs. Lealea Enterprise Co
Performance |
| Timeline |
| China Petrochemical |
| Lealea Enterprise |
China Petrochemical and Lealea Enterprise Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Petrochemical and Lealea Enterprise
The main advantage of trading using opposite China Petrochemical and Lealea Enterprise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Petrochemical position performs unexpectedly, Lealea Enterprise 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 Lealea Enterprise will offset losses from the drop in Lealea Enterprise'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 |
| Lealea Enterprise vs. Taiwan Semiconductor Manufacturing | Lealea Enterprise vs. Hon Hai Precision | Lealea Enterprise vs. MediaTek | Lealea Enterprise vs. Chunghwa Telecom 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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