Correlation Between China Petrochemical and Long Chen
Can any of the company-specific risk be diversified away by investing in both China Petrochemical and Long Chen 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 Long Chen 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 Long Chen Paper, you can compare the effects of market volatilities on China Petrochemical and Long Chen 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 Long Chen. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Petrochemical and Long Chen.
Diversification Opportunities for China Petrochemical and Long Chen
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Long is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding China Petrochemical Developmen and Long Chen Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Long Chen Paper 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 Long Chen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Long Chen Paper has no effect on the direction of China Petrochemical i.e., China Petrochemical and Long Chen go up and down completely randomly.
Pair Corralation between China Petrochemical and Long Chen
Assuming the 90 days trading horizon China Petrochemical Development is expected to generate 1.18 times more return on investment than Long Chen. However, China Petrochemical is 1.18 times more volatile than Long Chen Paper. It trades about -0.02 of its potential returns per unit of risk. Long Chen Paper is currently generating about -0.03 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. Long Chen Paper
Performance |
| Timeline |
| China Petrochemical |
| Long Chen Paper |
China Petrochemical and Long Chen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Petrochemical and Long Chen
The main advantage of trading using opposite China Petrochemical and Long Chen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Petrochemical position performs unexpectedly, Long Chen 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 Long Chen will offset losses from the drop in Long Chen'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 |
| Long Chen vs. Tainan Spinning Co | Long Chen vs. Lealea Enterprise Co | Long Chen vs. China Petrochemical Development | Long Chen 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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