Correlation Between China Petrochemical and Eternal Materials
Can any of the company-specific risk be diversified away by investing in both China Petrochemical and Eternal Materials 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 Eternal Materials 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 Eternal Materials Co, you can compare the effects of market volatilities on China Petrochemical and Eternal Materials 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 Eternal Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Petrochemical and Eternal Materials.
Diversification Opportunities for China Petrochemical and Eternal Materials
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between China and Eternal is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding China Petrochemical Developmen and Eternal Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eternal Materials 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 Eternal Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eternal Materials has no effect on the direction of China Petrochemical i.e., China Petrochemical and Eternal Materials go up and down completely randomly.
Pair Corralation between China Petrochemical and Eternal Materials
Assuming the 90 days trading horizon China Petrochemical Development is expected to under-perform the Eternal Materials. In addition to that, China Petrochemical is 1.84 times more volatile than Eternal Materials Co. It trades about -0.08 of its total potential returns per unit of risk. Eternal Materials Co is currently generating about 0.01 per unit of volatility. If you would invest 2,830 in Eternal Materials Co on October 28, 2024 and sell it today you would earn a total of 5.00 from holding Eternal Materials Co or generate 0.18% 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. Eternal Materials Co
Performance |
| Timeline |
| China Petrochemical |
| Eternal Materials |
China Petrochemical and Eternal Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Petrochemical and Eternal Materials
The main advantage of trading using opposite China Petrochemical and Eternal Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Petrochemical position performs unexpectedly, Eternal Materials 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 Eternal Materials will offset losses from the drop in Eternal Materials' 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 |
| Eternal Materials vs. Taiwan Fertilizer Co | Eternal Materials vs. Nan Ya Plastics | Eternal Materials vs. Formosa Chemicals Fibre | Eternal Materials vs. Far Eastern New |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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