Correlation Between Shanghai Yaoji and Hengli Petrochemical

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

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

Diversification Opportunities for Shanghai Yaoji and Hengli Petrochemical

0.36

Correlation Coefficient

Shanghai Yaoji  Hengli Petrochemical

Weak diversification

The 3 months correlation between Shanghai and Hengli is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Yaoji Playing and Hengli Petrochemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengli Petrochemical and Shanghai Yaoji 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 Shanghai Yaoji Playing are associated (or correlated) with Hengli Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengli Petrochemical has no effect on the direction of Shanghai Yaoji i.e., Shanghai Yaoji and Hengli Petrochemical go up and down completely randomly.

Pair Corralation between Shanghai Yaoji and Hengli Petrochemical

Assuming the 90 days trading horizon Shanghai Yaoji Playing is expected to generate 2.11 times more return on investment than Hengli Petrochemical. However, Shanghai Yaoji is 2.11 times more volatile than Hengli Petrochemical Co. It trades about 0.05 of its potential returns per unit of risk. Hengli Petrochemical Co is currently generating about 0.0 per unit of risk. If you would invest  1,409  in Shanghai Yaoji Playing on October 4, 2024 and sell it today you would earn a total of  1,219  from holding Shanghai Yaoji Playing or generate 86.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Shanghai Yaoji Playing  vs.  Hengli Petrochemical Co

Shanghai Yaoji Playing

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hengli Petrochemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Shanghai Yaoji and Hengli Petrochemical

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

The idea behind Shanghai Yaoji Playing and Hengli Petrochemical 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.