Correlation Between China Petrochemical and UPC Technology

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

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

Diversification Opportunities for China Petrochemical and UPC Technology

0.62

Correlation Coefficient

China Petrochemical  UPC Technology

Poor diversification

The 3 months correlation between China and UPC is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding China Petrochemical Developmen and UPC Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UPC Technology Corp and China 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 China Petrochemical Development are associated (or correlated) with UPC Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UPC Technology Corp has no effect on the direction of China Petrochemical i.e., China Petrochemical and UPC Technology go up and down completely randomly.

Pair Corralation between China Petrochemical and UPC Technology

Assuming the 90 days trading horizon China Petrochemical is expected to generate 1.41 times less return on investment than UPC Technology. But when comparing it to its historical volatility, China Petrochemical Development is 1.29 times less risky than UPC Technology. It trades about 0.04 of its potential returns per unit of risk. UPC Technology Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  884.00  in UPC Technology Corp on December 29, 2024 and sell it today you would earn a total of  39.00  from holding UPC Technology Corp or generate 4.41% return on investment over 90 days.

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

China Petrochemical Developmen  vs.  UPC Technology Corp

China Petrochemical

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Petrochemical Development are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, China Petrochemical is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

UPC Technology Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UPC Technology Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, UPC Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with China Petrochemical and UPC Technology

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

The idea behind China Petrochemical Development and UPC Technology Corp 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.