Correlation Between Hung Sheng and China Petrochemical
Can any of the company-specific risk be diversified away by investing in both Hung Sheng and China Petrochemical 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 Hung Sheng and China Petrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hung Sheng Construction and China Petrochemical Development, you can compare the effects of market volatilities on Hung Sheng and China Petrochemical 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 Hung Sheng with a short position of China Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hung Sheng and China Petrochemical.
Diversification Opportunities for Hung Sheng and China Petrochemical
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Hung and China is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Hung Sheng Construction and China Petrochemical Developmen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Petrochemical and Hung Sheng 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 Hung Sheng Construction are associated (or correlated) with China Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Petrochemical has no effect on the direction of Hung Sheng i.e., Hung Sheng and China Petrochemical go up and down completely randomly.
Pair Corralation between Hung Sheng and China Petrochemical
Assuming the 90 days trading horizon Hung Sheng Construction is expected to generate 1.18 times more return on investment than China Petrochemical. However, Hung Sheng is 1.18 times more volatile than China Petrochemical Development. It trades about 0.08 of its potential returns per unit of risk. China Petrochemical Development is currently generating about 0.05 per unit of risk. If you would invest 2,610 in Hung Sheng Construction on August 30, 2024 and sell it today you would earn a total of 70.00 from holding Hung Sheng Construction or generate 2.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hung Sheng Construction vs. China Petrochemical Developmen
Performance |
| Timeline |
| Hung Sheng Construction |
| China Petrochemical |
Hung Sheng and China Petrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hung Sheng and China Petrochemical
The main advantage of trading using opposite Hung Sheng and China Petrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hung Sheng position performs unexpectedly, China Petrochemical 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 China Petrochemical will offset losses from the drop in China Petrochemical's long position.| Hung Sheng vs. Tainan Spinning Co | Hung Sheng vs. Carnival Industrial Corp | Hung Sheng vs. Symtek Automation Asia | Hung Sheng vs. CTCI Corp |
| China Petrochemical vs. USI Corp | China Petrochemical vs. Grand Pacific Petrochemical | China Petrochemical vs. Taiwan Styrene Monomer | China Petrochemical vs. China Steel 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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