Correlation Between China Petrochemical and Nantex Industry
Can any of the company-specific risk be diversified away by investing in both China Petrochemical and Nantex Industry 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 Nantex Industry 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 Nantex Industry Co, you can compare the effects of market volatilities on China Petrochemical and Nantex Industry 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 Nantex Industry. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Petrochemical and Nantex Industry.
Diversification Opportunities for China Petrochemical and Nantex Industry
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Nantex is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding China Petrochemical Developmen and Nantex Industry Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nantex Industry 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 Nantex Industry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nantex Industry has no effect on the direction of China Petrochemical i.e., China Petrochemical and Nantex Industry go up and down completely randomly.
Pair Corralation between China Petrochemical and Nantex Industry
Assuming the 90 days trading horizon China Petrochemical Development is expected to under-perform the Nantex Industry. But the stock apears to be less risky and, when comparing its historical volatility, China Petrochemical Development is 1.14 times less risky than Nantex Industry. The stock trades about -0.03 of its potential returns per unit of risk. The Nantex Industry Co is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 3,705 in Nantex Industry Co on September 20, 2024 and sell it today you would lose (515.00) from holding Nantex Industry Co or give up 13.9% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 99.79% |
Values | Daily Returns |
China Petrochemical Developmen vs. Nantex Industry Co
Performance |
Timeline |
China Petrochemical |
Nantex Industry |
China Petrochemical and Nantex Industry Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with China Petrochemical and Nantex Industry
The main advantage of trading using opposite China Petrochemical and Nantex Industry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Petrochemical position performs unexpectedly, Nantex Industry 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 Nantex Industry will offset losses from the drop in Nantex Industry's long position.China Petrochemical vs. USI Corp | China Petrochemical vs. Grand Pacific Petrochemical | China Petrochemical vs. Taiwan Styrene Monomer | China Petrochemical vs. China Steel Corp |
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Check out your portfolio center.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 Global Correlations module to find global opportunities by holding instruments from different markets.
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