Correlation Between China Baoan and Maoming Petro

Can any of the company-specific risk be diversified away by investing in both China Baoan and Maoming Petro 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 China Baoan and Maoming Petro into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Baoan Group and Maoming Petro Chemical Shihua, you can compare the effects of market volatilities on China Baoan and Maoming Petro 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 China Baoan with a short position of Maoming Petro. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Baoan and Maoming Petro.

Diversification Opportunities for China Baoan and Maoming Petro

0.61

Correlation Coefficient

China Baoan  Maoming Petro

Poor diversification

The 3 months correlation between China and Maoming is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding China Baoan Group and Maoming Petro Chemical Shihua in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maoming Petro Chemical and China Baoan 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 China Baoan Group are associated (or correlated) with Maoming Petro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maoming Petro Chemical has no effect on the direction of China Baoan i.e., China Baoan and Maoming Petro go up and down completely randomly.

Pair Corralation between China Baoan and Maoming Petro

Assuming the 90 days trading horizon China Baoan Group is expected to under-perform the Maoming Petro. In addition to that, China Baoan is 1.08 times more volatile than Maoming Petro Chemical Shihua. It trades about -0.07 of its total potential returns per unit of risk. Maoming Petro Chemical Shihua is currently generating about 0.0 per unit of volatility. If you would invest  366.00  in Maoming Petro Chemical Shihua on October 6, 2024 and sell it today you would lose (6.00) from holding Maoming Petro Chemical Shihua or give up 1.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

China Baoan Group  vs.  Maoming Petro Chemical Shihua

China Baoan Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Baoan Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Maoming Petro Chemical

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Maoming Petro Chemical Shihua has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Maoming Petro is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Baoan and Maoming Petro

The main advantage of trading using opposite China Baoan and Maoming Petro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Baoan position performs unexpectedly, Maoming Petro 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 Maoming Petro will offset losses from the drop in Maoming Petro's long position.

The idea behind China Baoan Group and Maoming Petro Chemical Shihua 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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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.