Correlation Between Sinopec Shanghai and Nippon Steel
Can any of the company-specific risk be diversified away by investing in both Sinopec Shanghai and Nippon Steel 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 Nippon Steel 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 Nippon Steel, you can compare the effects of market volatilities on Sinopec Shanghai and Nippon Steel 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 Nippon Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinopec Shanghai and Nippon Steel.
Diversification Opportunities for Sinopec Shanghai and Nippon Steel
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Sinopec and Nippon is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Sinopec Shanghai Petrochemical and Nippon Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel 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 Nippon Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Steel has no effect on the direction of Sinopec Shanghai i.e., Sinopec Shanghai and Nippon Steel go up and down completely randomly.
Pair Corralation between Sinopec Shanghai and Nippon Steel
Assuming the 90 days trading horizon Sinopec Shanghai Petrochemical is expected to generate 2.06 times more return on investment than Nippon Steel. However, Sinopec Shanghai is 2.06 times more volatile than Nippon Steel. It trades about 0.02 of its potential returns per unit of risk. Nippon Steel is currently generating about -0.02 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 Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sinopec Shanghai Petrochemical vs. Nippon Steel
Performance |
| Timeline |
| Sinopec Shanghai Pet |
| Nippon Steel |
Sinopec Shanghai and Nippon Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sinopec Shanghai and Nippon Steel
The main advantage of trading using opposite Sinopec Shanghai and Nippon Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sinopec Shanghai position performs unexpectedly, Nippon Steel 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 Nippon Steel will offset losses from the drop in Nippon Steel's 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 |
| Nippon Steel vs. Sinopec Shanghai Petrochemical | Nippon Steel vs. TIANDE CHEMICAL | Nippon Steel vs. PTT Global Chemical | Nippon Steel vs. Genertec Universal Medical |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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