Correlation Between Sinopec Shanghai and Fortescue Metals
Can any of the company-specific risk be diversified away by investing in both Sinopec Shanghai and Fortescue Metals 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 Sinopec Shanghai and Fortescue Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sinopec Shanghai Petrochemical and Fortescue Metals Group, you can compare the effects of market volatilities on Sinopec Shanghai and Fortescue Metals 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 Sinopec Shanghai with a short position of Fortescue Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinopec Shanghai and Fortescue Metals.
Diversification Opportunities for Sinopec Shanghai and Fortescue Metals
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sinopec and Fortescue is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Sinopec Shanghai Petrochemical and Fortescue Metals Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortescue Metals and Sinopec Shanghai 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 Sinopec Shanghai Petrochemical are associated (or correlated) with Fortescue Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortescue Metals has no effect on the direction of Sinopec Shanghai i.e., Sinopec Shanghai and Fortescue Metals go up and down completely randomly.
Pair Corralation between Sinopec Shanghai and Fortescue Metals
Assuming the 90 days trading horizon Sinopec Shanghai Petrochemical is expected to generate 2.3 times more return on investment than Fortescue Metals. However, Sinopec Shanghai is 2.3 times more volatile than Fortescue Metals Group. It trades about 0.02 of its potential returns per unit of risk. Fortescue Metals Group is currently generating about -0.49 per unit of risk. If you would invest 14.00 in Sinopec Shanghai Petrochemical on October 11, 2024 and sell it today you would earn a total of 0.00 from holding Sinopec Shanghai Petrochemical or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sinopec Shanghai Petrochemical vs. Fortescue Metals Group
Performance |
| Timeline |
| Sinopec Shanghai Pet |
| Fortescue Metals |
Sinopec Shanghai and Fortescue Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sinopec Shanghai and Fortescue Metals
The main advantage of trading using opposite Sinopec Shanghai and Fortescue Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sinopec Shanghai position performs unexpectedly, Fortescue Metals 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 Fortescue Metals will offset losses from the drop in Fortescue Metals' long position.| Sinopec Shanghai vs. MCEWEN MINING INC | Sinopec Shanghai vs. De Grey Mining | Sinopec Shanghai vs. USWE SPORTS AB | Sinopec Shanghai vs. GALENA MINING LTD |
| Fortescue Metals vs. Sinopec Shanghai Petrochemical | Fortescue Metals vs. Mitsui Chemicals | Fortescue Metals vs. EBRO FOODS | Fortescue Metals vs. X FAB Silicon Foundries |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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