Correlation Between Rongsheng Petrochemical and Jinsanjiang Silicon

Can any of the company-specific risk be diversified away by investing in both Rongsheng Petrochemical and Jinsanjiang Silicon 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 Jinsanjiang Silicon 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 Jinsanjiang Silicon Material, you can compare the effects of market volatilities on Rongsheng Petrochemical and Jinsanjiang Silicon 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 Jinsanjiang Silicon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rongsheng Petrochemical and Jinsanjiang Silicon.

Diversification Opportunities for Rongsheng Petrochemical and Jinsanjiang Silicon

0.07

Correlation Coefficient

Rongsheng Petrochemical  Jinsanjiang Silicon

Significant diversification

The 3 months correlation between Rongsheng and Jinsanjiang is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Rongsheng Petrochemical Co and Jinsanjiang Silicon Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinsanjiang Silicon 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 Jinsanjiang Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinsanjiang Silicon has no effect on the direction of Rongsheng Petrochemical i.e., Rongsheng Petrochemical and Jinsanjiang Silicon go up and down completely randomly.

Pair Corralation between Rongsheng Petrochemical and Jinsanjiang Silicon

Assuming the 90 days trading horizon Rongsheng Petrochemical Co is expected to under-perform the Jinsanjiang Silicon. But the stock apears to be less risky and, when comparing its historical volatility, Rongsheng Petrochemical Co is 2.97 times less risky than Jinsanjiang Silicon. The stock trades about -0.33 of its potential returns per unit of risk. The Jinsanjiang Silicon Material is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,150  in Jinsanjiang Silicon Material on October 5, 2024 and sell it today you would earn a total of  132.00  from holding Jinsanjiang Silicon Material or generate 11.48% return on investment over 90 days.

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

Rongsheng Petrochemical Co  vs.  Jinsanjiang Silicon Material

Rongsheng Petrochemical

Risk-Adjusted Performance

0 of 100

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 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.

Jinsanjiang Silicon

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jinsanjiang Silicon Material are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jinsanjiang Silicon sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rongsheng Petrochemical and Jinsanjiang Silicon

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

The idea behind Rongsheng Petrochemical Co and Jinsanjiang Silicon Material 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.