Correlation Between Advanced Ceramic and China Petrochemical
Can any of the company-specific risk be diversified away by investing in both Advanced Ceramic 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 Advanced Ceramic and China Petrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Ceramic X and China Petrochemical Development, you can compare the effects of market volatilities on Advanced Ceramic 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 Advanced Ceramic with a short position of China Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Ceramic and China Petrochemical.
Diversification Opportunities for Advanced Ceramic and China Petrochemical
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Advanced and China is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Ceramic X and China Petrochemical Developmen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Petrochemical and Advanced Ceramic 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 Advanced Ceramic X 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 Advanced Ceramic i.e., Advanced Ceramic and China Petrochemical go up and down completely randomly.
Pair Corralation between Advanced Ceramic and China Petrochemical
Assuming the 90 days trading horizon Advanced Ceramic X is expected to generate 1.47 times more return on investment than China Petrochemical. However, Advanced Ceramic is 1.47 times more volatile than China Petrochemical Development. It trades about 0.01 of its potential returns per unit of risk. China Petrochemical Development is currently generating about -0.02 per unit of risk. If you would invest 18,189 in Advanced Ceramic X on September 12, 2024 and sell it today you would lose (389.00) from holding Advanced Ceramic X or give up 2.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advanced Ceramic X vs. China Petrochemical Developmen
Performance |
| Timeline |
| Advanced Ceramic X |
| China Petrochemical |
Advanced Ceramic and China Petrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Ceramic and China Petrochemical
The main advantage of trading using opposite Advanced Ceramic and China Petrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Ceramic 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.| Advanced Ceramic vs. Chien Kuo Construction | Advanced Ceramic vs. Onano Industrial Corp | Advanced Ceramic vs. Tsang Yow Industrial | Advanced Ceramic vs. Singtex Industrial Co |
| China Petrochemical vs. Tainan Spinning Co | China Petrochemical vs. Lealea Enterprise Co | China Petrochemical vs. Ruentex Development Co | China Petrochemical vs. WiseChip Semiconductor |
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 Stocks Directory module to find actively traded stocks across global markets.
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