Correlation Between China Petrochemical and Jinan Acetate
Can any of the company-specific risk be diversified away by investing in both China Petrochemical and Jinan Acetate 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 Jinan Acetate 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 Jinan Acetate Chemical, you can compare the effects of market volatilities on China Petrochemical and Jinan Acetate 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 Jinan Acetate. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Petrochemical and Jinan Acetate.
Diversification Opportunities for China Petrochemical and Jinan Acetate
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between China and Jinan is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding China Petrochemical Developmen and Jinan Acetate Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinan Acetate Chemical 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 Jinan Acetate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinan Acetate Chemical has no effect on the direction of China Petrochemical i.e., China Petrochemical and Jinan Acetate go up and down completely randomly.
Pair Corralation between China Petrochemical and Jinan Acetate
Assuming the 90 days trading horizon China Petrochemical Development is expected to under-perform the Jinan Acetate. But the stock apears to be less risky and, when comparing its historical volatility, China Petrochemical Development is 1.56 times less risky than Jinan Acetate. The stock trades about -0.02 of its potential returns per unit of risk. The Jinan Acetate Chemical is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 87,800 in Jinan Acetate Chemical on September 12, 2024 and sell it today you would earn a total of 6,300 from holding Jinan Acetate Chemical or generate 7.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Petrochemical Developmen vs. Jinan Acetate Chemical
Performance |
| Timeline |
| China Petrochemical |
| Jinan Acetate Chemical |
China Petrochemical and Jinan Acetate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Petrochemical and Jinan Acetate
The main advantage of trading using opposite China Petrochemical and Jinan Acetate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Petrochemical position performs unexpectedly, Jinan Acetate 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 Jinan Acetate will offset losses from the drop in Jinan Acetate'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 |
| Jinan Acetate vs. Tainan Spinning Co | Jinan Acetate vs. Lealea Enterprise Co | Jinan Acetate vs. China Petrochemical Development | Jinan Acetate 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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