Correlation Between Henzhen Zhaowei and China Petroleum

Can any of the company-specific risk be diversified away by investing in both Henzhen Zhaowei and China Petroleum 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 Henzhen Zhaowei and China Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Henzhen Zhaowei Machinery and China Petroleum Chemical, you can compare the effects of market volatilities on Henzhen Zhaowei and China Petroleum 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 Henzhen Zhaowei with a short position of China Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Henzhen Zhaowei and China Petroleum.

Diversification Opportunities for Henzhen Zhaowei and China Petroleum

-0.05

Correlation Coefficient

Henzhen Zhaowei  China Petroleum

Good diversification

The 3 months correlation between Henzhen and China is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Henzhen Zhaowei Machinery and China Petroleum Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Petroleum Chemical and Henzhen Zhaowei 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 Henzhen Zhaowei Machinery are associated (or correlated) with China Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Petroleum Chemical has no effect on the direction of Henzhen Zhaowei i.e., Henzhen Zhaowei and China Petroleum go up and down completely randomly.

Pair Corralation between Henzhen Zhaowei and China Petroleum

Assuming the 90 days trading horizon Henzhen Zhaowei Machinery is expected to generate 4.75 times more return on investment than China Petroleum. However, Henzhen Zhaowei is 4.75 times more volatile than China Petroleum Chemical. It trades about 0.27 of its potential returns per unit of risk. China Petroleum Chemical is currently generating about -0.1 per unit of risk. If you would invest  4,610  in Henzhen Zhaowei Machinery on October 24, 2024 and sell it today you would earn a total of  5,886  from holding Henzhen Zhaowei Machinery or generate 127.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Henzhen Zhaowei Machinery  vs.  China Petroleum Chemical

Henzhen Zhaowei Machinery

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Henzhen Zhaowei Machinery are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Henzhen Zhaowei sustained solid returns over the last few months and may actually be approaching a breakup point.

China Petroleum Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Petroleum Chemical 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.

Pair Trading with Henzhen Zhaowei and China Petroleum

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

The idea behind Henzhen Zhaowei Machinery and China Petroleum 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.