Correlation Between Sinopec Shanghai and MGP Ingredients
Can any of the company-specific risk be diversified away by investing in both Sinopec Shanghai and MGP Ingredients 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 MGP Ingredients 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 MGP Ingredients, you can compare the effects of market volatilities on Sinopec Shanghai and MGP Ingredients 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 MGP Ingredients. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinopec Shanghai and MGP Ingredients.
Diversification Opportunities for Sinopec Shanghai and MGP Ingredients
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sinopec and MGP is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Sinopec Shanghai Petrochemical and MGP Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGP Ingredients 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 MGP Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGP Ingredients has no effect on the direction of Sinopec Shanghai i.e., Sinopec Shanghai and MGP Ingredients go up and down completely randomly.
Pair Corralation between Sinopec Shanghai and MGP Ingredients
Assuming the 90 days trading horizon Sinopec Shanghai Petrochemical is expected to generate 1.99 times more return on investment than MGP Ingredients. However, Sinopec Shanghai is 1.99 times more volatile than MGP Ingredients. It trades about 0.02 of its potential returns per unit of risk. MGP Ingredients is currently generating about -0.26 per unit of risk. If you would invest 14.00 in Sinopec Shanghai Petrochemical on October 23, 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sinopec Shanghai Petrochemical vs. MGP Ingredients
Performance |
| Timeline |
| Sinopec Shanghai Pet |
| MGP Ingredients |
Sinopec Shanghai and MGP Ingredients Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sinopec Shanghai and MGP Ingredients
The main advantage of trading using opposite Sinopec Shanghai and MGP Ingredients positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sinopec Shanghai position performs unexpectedly, MGP Ingredients 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 MGP Ingredients will offset losses from the drop in MGP Ingredients' long position.| Sinopec Shanghai vs. Reliance Industries Limited | Sinopec Shanghai vs. Superior Plus Corp | Sinopec Shanghai vs. Origin Agritech | Sinopec Shanghai vs. Identiv |
| MGP Ingredients vs. Sinopec Shanghai Petrochemical | MGP Ingredients vs. SEKISUI CHEMICAL | MGP Ingredients vs. Chesapeake Utilities | MGP Ingredients vs. Sekisui Chemical Co |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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