Correlation Between China Petrochemical and Double Bond

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

Diversification Opportunities for China Petrochemical and Double Bond

0.4

Correlation Coefficient

China Petrochemical  Double Bond

Very weak diversification

The 3 months correlation between China and Double is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding China Petrochemical Developmen and Double Bond Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Double Bond Chemical 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 Double Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Double Bond Chemical has no effect on the direction of China Petrochemical i.e., China Petrochemical and Double Bond go up and down completely randomly.

Pair Corralation between China Petrochemical and Double Bond

Assuming the 90 days trading horizon China Petrochemical Development is expected to generate 1.58 times more return on investment than Double Bond. However, China Petrochemical is 1.58 times more volatile than Double Bond Chemical. It trades about 0.03 of its potential returns per unit of risk. Double Bond Chemical is currently generating about 0.02 per unit of risk. If you would invest  770.00  in China Petrochemical Development on December 27, 2024 and sell it today you would earn a total of  13.00  from holding China Petrochemical Development or generate 1.69% return on investment over 90 days.

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

China Petrochemical Developmen  vs.  Double Bond Chemical

China Petrochemical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Petrochemical Development are ranked lower than 2 (%) 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.

Double Bond Chemical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Double Bond Chemical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Double Bond 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 Double Bond

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

The idea behind China Petrochemical Development and Double Bond 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.