Correlation Between China Petrochemical and Daxin Materials
Can any of the company-specific risk be diversified away by investing in both China Petrochemical and Daxin Materials 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 Daxin Materials 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 Daxin Materials Corp, you can compare the effects of market volatilities on China Petrochemical and Daxin Materials 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 Daxin Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Petrochemical and Daxin Materials.
Diversification Opportunities for China Petrochemical and Daxin Materials
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between China and Daxin is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding China Petrochemical Developmen and Daxin Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daxin Materials Corp 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 Daxin Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daxin Materials Corp has no effect on the direction of China Petrochemical i.e., China Petrochemical and Daxin Materials go up and down completely randomly.
Pair Corralation between China Petrochemical and Daxin Materials
Assuming the 90 days trading horizon China Petrochemical Development is expected to under-perform the Daxin Materials. But the stock apears to be less risky and, when comparing its historical volatility, China Petrochemical Development is 2.1 times less risky than Daxin Materials. The stock trades about -0.02 of its potential returns per unit of risk. The Daxin Materials Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 11,350 in Daxin Materials Corp on September 12, 2024 and sell it today you would earn a total of 9,400 from holding Daxin Materials Corp or generate 82.82% 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. Daxin Materials Corp
Performance |
| Timeline |
| China Petrochemical |
| Daxin Materials Corp |
China Petrochemical and Daxin Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Petrochemical and Daxin Materials
The main advantage of trading using opposite China Petrochemical and Daxin Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Petrochemical position performs unexpectedly, Daxin Materials 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 Daxin Materials will offset losses from the drop in Daxin Materials' 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 |
| Daxin Materials vs. Tainan Spinning Co | Daxin Materials vs. Lealea Enterprise Co | Daxin Materials vs. China Petrochemical Development | Daxin Materials 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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