Correlation Between China Petrochemical and BES Engineering
Can any of the company-specific risk be diversified away by investing in both China Petrochemical and BES Engineering 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 BES Engineering 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 BES Engineering Co, you can compare the effects of market volatilities on China Petrochemical and BES Engineering 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 BES Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Petrochemical and BES Engineering.
Diversification Opportunities for China Petrochemical and BES Engineering
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and BES is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding China Petrochemical Developmen and BES Engineering Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BES Engineering 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 BES Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BES Engineering has no effect on the direction of China Petrochemical i.e., China Petrochemical and BES Engineering go up and down completely randomly.
Pair Corralation between China Petrochemical and BES Engineering
Assuming the 90 days trading horizon China Petrochemical is expected to generate 1.23 times less return on investment than BES Engineering. But when comparing it to its historical volatility, China Petrochemical Development is 1.26 times less risky than BES Engineering. It trades about 0.05 of its potential returns per unit of risk. BES Engineering Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,090 in BES Engineering Co on August 30, 2024 and sell it today you would earn a total of 20.00 from holding BES Engineering Co or generate 1.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
China Petrochemical Developmen vs. BES Engineering Co
Performance |
| Timeline |
| China Petrochemical |
| BES Engineering |
China Petrochemical and BES Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Petrochemical and BES Engineering
The main advantage of trading using opposite China Petrochemical and BES Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Petrochemical position performs unexpectedly, BES Engineering 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 BES Engineering will offset losses from the drop in BES Engineering'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 |
| BES Engineering vs. Hung Sheng Construction | BES Engineering vs. Taiwan Glass Ind | BES Engineering vs. China Petrochemical Development | BES Engineering vs. Taiwan Tea Corp |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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