Correlation Between Pengxin International and Wanhua Chemical
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By analyzing existing cross correlation between Pengxin International Mining and Wanhua Chemical Group, you can compare the effects of market volatilities on Pengxin International and Wanhua Chemical 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 Pengxin International with a short position of Wanhua Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pengxin International and Wanhua Chemical.
Diversification Opportunities for Pengxin International and Wanhua Chemical
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pengxin and Wanhua is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Pengxin International Mining and Wanhua Chemical Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wanhua Chemical Group and Pengxin International 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 Pengxin International Mining are associated (or correlated) with Wanhua Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wanhua Chemical Group has no effect on the direction of Pengxin International i.e., Pengxin International and Wanhua Chemical go up and down completely randomly.
Pair Corralation between Pengxin International and Wanhua Chemical
Assuming the 90 days trading horizon Pengxin International Mining is expected to generate 1.76 times more return on investment than Wanhua Chemical. However, Pengxin International is 1.76 times more volatile than Wanhua Chemical Group. It trades about 0.01 of its potential returns per unit of risk. Wanhua Chemical Group is currently generating about -0.02 per unit of risk. If you would invest 322.00 in Pengxin International Mining on August 31, 2024 and sell it today you would lose (6.00) from holding Pengxin International Mining or give up 1.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.72% |
| Values | Daily Returns |
Pengxin International Mining vs. Wanhua Chemical Group
Performance |
| Timeline |
| Pengxin International |
| Wanhua Chemical Group |
Pengxin International and Wanhua Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pengxin International and Wanhua Chemical
The main advantage of trading using opposite Pengxin International and Wanhua Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pengxin International position performs unexpectedly, Wanhua Chemical 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 Wanhua Chemical will offset losses from the drop in Wanhua Chemical's long position.The idea behind Pengxin International Mining and Wanhua Chemical Group 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.
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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