Correlation Between Rongsheng Petrochemical and Jinduicheng Molybdenum

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

Diversification Opportunities for Rongsheng Petrochemical and Jinduicheng Molybdenum

0.78

Correlation Coefficient

Rongsheng Petrochemical  Jinduicheng Molybdenum

Poor diversification

The 3 months correlation between Rongsheng and Jinduicheng is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Rongsheng Petrochemical Co and Jinduicheng Molybdenum Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinduicheng Molybdenum 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 Jinduicheng Molybdenum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinduicheng Molybdenum has no effect on the direction of Rongsheng Petrochemical i.e., Rongsheng Petrochemical and Jinduicheng Molybdenum go up and down completely randomly.

Pair Corralation between Rongsheng Petrochemical and Jinduicheng Molybdenum

Assuming the 90 days trading horizon Rongsheng Petrochemical Co is expected to under-perform the Jinduicheng Molybdenum. But the stock apears to be less risky and, when comparing its historical volatility, Rongsheng Petrochemical Co is 1.11 times less risky than Jinduicheng Molybdenum. The stock trades about -0.17 of its potential returns per unit of risk. The Jinduicheng Molybdenum Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,035  in Jinduicheng Molybdenum Co on October 27, 2024 and sell it today you would earn a total of  15.00  from holding Jinduicheng Molybdenum Co or generate 1.45% return on investment over 90 days.

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

Rongsheng Petrochemical Co  vs.  Jinduicheng Molybdenum Co

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 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.

Jinduicheng Molybdenum

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Rongsheng Petrochemical and Jinduicheng Molybdenum

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

The idea behind Rongsheng Petrochemical Co and Jinduicheng Molybdenum Co 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.