Correlation Between Oriental Union and Grand Pacific
Can any of the company-specific risk be diversified away by investing in both Oriental Union and Grand Pacific 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 Oriental Union and Grand Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oriental Union Chemical and Grand Pacific Petrochemical, you can compare the effects of market volatilities on Oriental Union and Grand Pacific 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 Oriental Union with a short position of Grand Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oriental Union and Grand Pacific.
Diversification Opportunities for Oriental Union and Grand Pacific
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Oriental and Grand is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Oriental Union Chemical and Grand Pacific Petrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Pacific Petroc and Oriental Union 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 Oriental Union Chemical are associated (or correlated) with Grand Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Pacific Petroc has no effect on the direction of Oriental Union i.e., Oriental Union and Grand Pacific go up and down completely randomly.
Pair Corralation between Oriental Union and Grand Pacific
Assuming the 90 days trading horizon Oriental Union Chemical is expected to generate 0.95 times more return on investment than Grand Pacific. However, Oriental Union Chemical is 1.05 times less risky than Grand Pacific. It trades about -0.03 of its potential returns per unit of risk. Grand Pacific Petrochemical is currently generating about -0.09 per unit of risk. If you would invest 2,025 in Oriental Union Chemical on December 4, 2024 and sell it today you would lose (400.00) from holding Oriental Union Chemical or give up 19.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.78% |
| Values | Daily Returns |
Oriental Union Chemical vs. Grand Pacific Petrochemical
Performance |
| Timeline |
| Oriental Union Chemical |
| Grand Pacific Petroc |
Oriental Union and Grand Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oriental Union and Grand Pacific
The main advantage of trading using opposite Oriental Union and Grand Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oriental Union position performs unexpectedly, Grand Pacific 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 Grand Pacific will offset losses from the drop in Grand Pacific's long position.| Oriental Union vs. China Man Made Fiber | ||
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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