Correlation Between China Petrochemical and Ingentec
Can any of the company-specific risk be diversified away by investing in both China Petrochemical and Ingentec 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 Ingentec 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 Ingentec, you can compare the effects of market volatilities on China Petrochemical and Ingentec 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 Ingentec. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Petrochemical and Ingentec.
Diversification Opportunities for China Petrochemical and Ingentec
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Ingentec is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding China Petrochemical Developmen and Ingentec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ingentec 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 Ingentec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ingentec has no effect on the direction of China Petrochemical i.e., China Petrochemical and Ingentec go up and down completely randomly.
Pair Corralation between China Petrochemical and Ingentec
Assuming the 90 days trading horizon China Petrochemical Development is expected to generate 0.63 times more return on investment than Ingentec. However, China Petrochemical Development is 1.59 times less risky than Ingentec. It trades about -0.18 of its potential returns per unit of risk. Ingentec is currently generating about -0.2 per unit of risk. If you would invest 804.00 in China Petrochemical Development on October 15, 2024 and sell it today you would lose (113.00) from holding China Petrochemical Development or give up 14.05% 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. Ingentec
Performance |
| Timeline |
| China Petrochemical |
| Ingentec |
China Petrochemical and Ingentec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Petrochemical and Ingentec
The main advantage of trading using opposite China Petrochemical and Ingentec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Petrochemical position performs unexpectedly, Ingentec 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 Ingentec will offset losses from the drop in Ingentec'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 |
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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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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