Correlation Between China Petrochemical and International CSRC
Can any of the company-specific risk be diversified away by investing in both China Petrochemical and International CSRC 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 International CSRC 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 International CSRC Investment, you can compare the effects of market volatilities on China Petrochemical and International CSRC 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 International CSRC. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Petrochemical and International CSRC.
Diversification Opportunities for China Petrochemical and International CSRC
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and International is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding China Petrochemical Developmen and International CSRC Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International CSRC 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 International CSRC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International CSRC has no effect on the direction of China Petrochemical i.e., China Petrochemical and International CSRC go up and down completely randomly.
Pair Corralation between China Petrochemical and International CSRC
Assuming the 90 days trading horizon China Petrochemical Development is expected to generate 1.51 times more return on investment than International CSRC. However, China Petrochemical is 1.51 times more volatile than International CSRC Investment. It trades about -0.04 of its potential returns per unit of risk. International CSRC Investment is currently generating about -0.08 per unit of risk. If you would invest 1,025 in China Petrochemical Development on September 1, 2024 and sell it today you would lose (210.00) from holding China Petrochemical Development or give up 20.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Petrochemical Developmen vs. International CSRC Investment
Performance |
| Timeline |
| China Petrochemical |
| International CSRC |
China Petrochemical and International CSRC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Petrochemical and International CSRC
The main advantage of trading using opposite China Petrochemical and International CSRC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Petrochemical position performs unexpectedly, International CSRC 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 International CSRC will offset losses from the drop in International CSRC's long position.| China Petrochemical vs. Basso Industry Corp | China Petrochemical vs. Chung Hsin Electric Machinery | China Petrochemical vs. TYC Brother Industrial | China Petrochemical vs. TECO Electric Machinery |
| International CSRC vs. Cheng Shin Rubber | International CSRC vs. TSRC Corp | International CSRC vs. Taiwan Cement Corp | International CSRC vs. China Steel Chemical |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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