Correlation Between Rongsheng Petrochemical and CGN Nuclear

Can any of the company-specific risk be diversified away by investing in both Rongsheng Petrochemical and CGN Nuclear 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 Rongsheng Petrochemical and CGN Nuclear into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rongsheng Petrochemical Co and CGN Nuclear Technology, you can compare the effects of market volatilities on Rongsheng Petrochemical and CGN Nuclear 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 Rongsheng Petrochemical with a short position of CGN Nuclear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rongsheng Petrochemical and CGN Nuclear.

Diversification Opportunities for Rongsheng Petrochemical and CGN Nuclear

0.9

Correlation Coefficient

Rongsheng Petrochemical  CGN Nuclear

Almost no diversification

The 3 months correlation between Rongsheng and CGN is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Rongsheng Petrochemical Co and CGN Nuclear Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CGN Nuclear Technology and Rongsheng Petrochemical 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 Rongsheng Petrochemical Co are associated (or correlated) with CGN Nuclear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CGN Nuclear Technology has no effect on the direction of Rongsheng Petrochemical i.e., Rongsheng Petrochemical and CGN Nuclear go up and down completely randomly.

Pair Corralation between Rongsheng Petrochemical and CGN Nuclear

Assuming the 90 days trading horizon Rongsheng Petrochemical Co is expected to generate 0.71 times more return on investment than CGN Nuclear. However, Rongsheng Petrochemical Co is 1.4 times less risky than CGN Nuclear. It trades about 0.02 of its potential returns per unit of risk. CGN Nuclear Technology is currently generating about -0.02 per unit of risk. If you would invest  876.00  in Rongsheng Petrochemical Co on December 2, 2024 and sell it today you would earn a total of  5.00  from holding Rongsheng Petrochemical Co or generate 0.57% return on investment over 90 days.

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

Rongsheng Petrochemical Co  vs.  CGN Nuclear Technology

Rongsheng Petrochemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rongsheng Petrochemical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

CGN Nuclear Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days CGN Nuclear Technology 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Rongsheng Petrochemical and CGN Nuclear

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

The idea behind Rongsheng Petrochemical Co and CGN Nuclear Technology 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.