Correlation Between SH Energy and Kg Chemical

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Can any of the company-specific risk be diversified away by investing in both SH Energy and Kg Chemical 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 SH Energy and Kg Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SH Energy Chemical and Kg Chemical, you can compare the effects of market volatilities on SH Energy and Kg Chemical 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 SH Energy with a short position of Kg Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of SH Energy and Kg Chemical.

Diversification Opportunities for SH Energy and Kg Chemical

0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between 002360 and 001390 is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding SH Energy Chemical and Kg Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kg Chemical and SH 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 SH Energy Chemical are associated (or correlated) with Kg Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kg Chemical has no effect on the direction of SH Energy i.e., SH Energy and Kg Chemical go up and down completely randomly.

Pair Corralation between SH Energy and Kg Chemical

Assuming the 90 days trading horizon SH Energy is expected to generate 1.15 times less return on investment than Kg Chemical. In addition to that, SH Energy is 1.64 times more volatile than Kg Chemical. It trades about 0.21 of its total potential returns per unit of risk. Kg Chemical is currently generating about 0.39 per unit of volatility. If you would invest  346,735  in Kg Chemical on October 11, 2024 and sell it today you would earn a total of  37,265  from holding Kg Chemical or generate 10.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

SH Energy Chemical  vs.  Kg Chemical

 Performance 
       Timeline  
SH Energy Chemical 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

0 of 100

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

SH Energy and Kg Chemical Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SH Energy and Kg Chemical

The main advantage of trading using opposite SH Energy and Kg Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SH Energy position performs unexpectedly, Kg Chemical 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 Kg Chemical will offset losses from the drop in Kg Chemical's long position.
The idea behind SH Energy Chemical and Kg Chemical 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.
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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