Correlation Between Hengli Petrochemical and Guangzhou Boji

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Can any of the company-specific risk be diversified away by investing in both Hengli Petrochemical and Guangzhou Boji 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 Hengli Petrochemical and Guangzhou Boji into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hengli Petrochemical Co and Guangzhou Boji Medical, you can compare the effects of market volatilities on Hengli Petrochemical and Guangzhou Boji 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 Hengli Petrochemical with a short position of Guangzhou Boji. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hengli Petrochemical and Guangzhou Boji.

Diversification Opportunities for Hengli Petrochemical and Guangzhou Boji

HengliGuangzhouDiversified AwayHengliGuangzhouDiversified Away100%
0.4
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Hengli and Guangzhou is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hengli Petrochemical Co and Guangzhou Boji Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Boji Medical and Hengli 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 Hengli Petrochemical Co are associated (or correlated) with Guangzhou Boji. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Boji Medical has no effect on the direction of Hengli Petrochemical i.e., Hengli Petrochemical and Guangzhou Boji go up and down completely randomly.

Pair Corralation between Hengli Petrochemical and Guangzhou Boji

Assuming the 90 days trading horizon Hengli Petrochemical is expected to generate 2.09 times less return on investment than Guangzhou Boji. But when comparing it to its historical volatility, Hengli Petrochemical Co is 1.59 times less risky than Guangzhou Boji. It trades about 0.07 of its potential returns per unit of risk. Guangzhou Boji Medical is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  702.00  in Guangzhou Boji Medical on November 21, 2024 and sell it today you would earn a total of  287.00  from holding Guangzhou Boji Medical or generate 40.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Hengli Petrochemical Co  vs.  Guangzhou Boji Medical

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-50510
JavaScript chart by amCharts 3.21.15600346 300404
       Timeline  
Hengli Petrochemical 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Hengli Petrochemical Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hengli Petrochemical may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb1414.51515.516
Guangzhou Boji Medical 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Boji Medical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Boji may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb88.599.51010.51111.5

Hengli Petrochemical and Guangzhou Boji Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.62-2.71-1.8-0.890.00.891.822.753.674.6 0.050.100.150.200.250.30
JavaScript chart by amCharts 3.21.15600346 300404
       Returns  

Pair Trading with Hengli Petrochemical and Guangzhou Boji

The main advantage of trading using opposite Hengli Petrochemical and Guangzhou Boji positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hengli Petrochemical position performs unexpectedly, Guangzhou Boji 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 Guangzhou Boji will offset losses from the drop in Guangzhou Boji's long position.
The idea behind Hengli Petrochemical Co and Guangzhou Boji Medical pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.

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