Correlation Between Valero Energy and Sinopec Shanghai
Can any of the company-specific risk be diversified away by investing in both Valero Energy and Sinopec Shanghai 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 Valero Energy and Sinopec Shanghai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Valero Energy and Sinopec Shanghai Petrochemical, you can compare the effects of market volatilities on Valero Energy and Sinopec Shanghai 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 Valero Energy with a short position of Sinopec Shanghai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valero Energy and Sinopec Shanghai.
Diversification Opportunities for Valero Energy and Sinopec Shanghai
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Valero and Sinopec is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Valero Energy and Sinopec Shanghai Petrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinopec Shanghai Pet and Valero Energy 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 Valero Energy are associated (or correlated) with Sinopec Shanghai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinopec Shanghai Pet has no effect on the direction of Valero Energy i.e., Valero Energy and Sinopec Shanghai go up and down completely randomly.
Pair Corralation between Valero Energy and Sinopec Shanghai
Considering the 90-day investment horizon Valero Energy is expected to generate 12.31 times less return on investment than Sinopec Shanghai. But when comparing it to its historical volatility, Valero Energy is 8.08 times less risky than Sinopec Shanghai. It trades about 0.04 of its potential returns per unit of risk. Sinopec Shanghai Petrochemical is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 10.00 in Sinopec Shanghai Petrochemical on September 2, 2024 and sell it today you would earn a total of 4.00 from holding Sinopec Shanghai Petrochemical or generate 40.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Valero Energy vs. Sinopec Shanghai Petrochemical
Performance |
| Timeline |
| Valero Energy |
| Sinopec Shanghai Pet |
Valero Energy and Sinopec Shanghai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Valero Energy and Sinopec Shanghai
The main advantage of trading using opposite Valero Energy and Sinopec Shanghai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valero Energy position performs unexpectedly, Sinopec Shanghai 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 Sinopec Shanghai will offset losses from the drop in Sinopec Shanghai's long position.| Valero Energy vs. Phillips 66 | Valero Energy vs. HF Sinclair Corp | Valero Energy vs. PBF Energy | Valero Energy vs. CVR Energy |
| Sinopec Shanghai vs. CVR Energy | Sinopec Shanghai vs. Valero Energy | Sinopec Shanghai vs. Phillips 66 | Sinopec Shanghai vs. Marathon Petroleum Corp |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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