Correlation Between Oriental Union and China Man

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

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

Diversification Opportunities for Oriental Union and China Man

0.21

Correlation Coefficient

Oriental Union  China Man

Modest diversification

The 3 months correlation between Oriental and China is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Oriental Union Chemical and China Man Made Fiber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Man Made and Oriental Union 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 Oriental Union Chemical are associated (or correlated) with China Man. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Man Made has no effect on the direction of Oriental Union i.e., Oriental Union and China Man go up and down completely randomly.

Pair Corralation between Oriental Union and China Man

Assuming the 90 days trading horizon Oriental Union Chemical is expected to generate 1.88 times more return on investment than China Man. However, Oriental Union is 1.88 times more volatile than China Man Made Fiber. It trades about 0.06 of its potential returns per unit of risk. China Man Made Fiber is currently generating about -0.06 per unit of risk. If you would invest  1,420  in Oriental Union Chemical on December 30, 2024 and sell it today you would earn a total of  95.00  from holding Oriental Union Chemical or generate 6.69% return on investment over 90 days.

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

Oriental Union Chemical  vs.  China Man Made Fiber

Oriental Union Chemical

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oriental Union Chemical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Oriental Union may actually be approaching a critical reversion point that can send shares even higher in April 2025.

China Man Made

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Man Made Fiber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, China Man 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 Oriental Union and China Man

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

The idea behind Oriental Union Chemical and China Man Made Fiber 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.