Correlation Between Maoming Petro and Yunnan Jianzhijia

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

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

Diversification Opportunities for Maoming Petro and Yunnan Jianzhijia

0.8

Correlation Coefficient

Maoming Petro  Yunnan Jianzhijia

Very poor diversification

The 3 months correlation between Maoming and Yunnan is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Maoming Petro Chemical Shihua and Yunnan Jianzhijia Health Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yunnan Jianzhijia and Maoming Petro 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 Maoming Petro Chemical Shihua are associated (or correlated) with Yunnan Jianzhijia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yunnan Jianzhijia has no effect on the direction of Maoming Petro i.e., Maoming Petro and Yunnan Jianzhijia go up and down completely randomly.

Pair Corralation between Maoming Petro and Yunnan Jianzhijia

Assuming the 90 days trading horizon Maoming Petro Chemical Shihua is expected to generate 0.71 times more return on investment than Yunnan Jianzhijia. However, Maoming Petro Chemical Shihua is 1.4 times less risky than Yunnan Jianzhijia. It trades about 0.05 of its potential returns per unit of risk. Yunnan Jianzhijia Health Chain is currently generating about 0.02 per unit of risk. If you would invest  349.00  in Maoming Petro Chemical Shihua on October 23, 2024 and sell it today you would earn a total of  22.00  from holding Maoming Petro Chemical Shihua or generate 6.3% return on investment over 90 days.

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

Maoming Petro Chemical Shihua  vs.  Yunnan Jianzhijia Health Chain

Maoming Petro Chemical

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Maoming Petro Chemical Shihua are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Maoming Petro may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Yunnan Jianzhijia

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yunnan Jianzhijia Health Chain are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Yunnan Jianzhijia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Maoming Petro and Yunnan Jianzhijia

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

The idea behind Maoming Petro Chemical Shihua and Yunnan Jianzhijia Health Chain 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.