Correlation Between CSG Holding and Rongsheng Petrochemical

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

By analyzing existing cross correlation between CSG Holding Co and Rongsheng Petrochemical Co, you can compare the effects of market volatilities on CSG Holding and Rongsheng Petrochemical 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 CSG Holding with a short position of Rongsheng Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSG Holding and Rongsheng Petrochemical.

Diversification Opportunities for CSG Holding and Rongsheng Petrochemical

0.53

Correlation Coefficient

CSG Holding  Rongsheng Petrochemical

Very weak diversification

The 3 months correlation between CSG and Rongsheng is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding CSG Holding Co and Rongsheng Petrochemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rongsheng Petrochemical and CSG Holding 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 CSG Holding Co are associated (or correlated) with Rongsheng Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rongsheng Petrochemical has no effect on the direction of CSG Holding i.e., CSG Holding and Rongsheng Petrochemical go up and down completely randomly.

Pair Corralation between CSG Holding and Rongsheng Petrochemical

Assuming the 90 days trading horizon CSG Holding Co is expected to under-perform the Rongsheng Petrochemical. But the stock apears to be less risky and, when comparing its historical volatility, CSG Holding Co is 1.49 times less risky than Rongsheng Petrochemical. The stock trades about -0.32 of its potential returns per unit of risk. The Rongsheng Petrochemical Co is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  999.00  in Rongsheng Petrochemical Co on September 12, 2024 and sell it today you would lose (33.00) from holding Rongsheng Petrochemical Co or give up 3.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

CSG Holding Co  vs.  Rongsheng Petrochemical Co

CSG Holding

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CSG Holding Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CSG Holding may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Rongsheng Petrochemical

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rongsheng Petrochemical Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Rongsheng Petrochemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CSG Holding and Rongsheng Petrochemical

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

The idea behind CSG Holding Co and Rongsheng Petrochemical Co 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.