Correlation Between Prime Oil and Chi Hua

Can any of the company-specific risk be diversified away by investing in both Prime Oil and Chi Hua 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 Prime Oil and Chi Hua into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Prime Oil Chemical and Chi Hua Fitness, you can compare the effects of market volatilities on Prime Oil and Chi Hua 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 Prime Oil with a short position of Chi Hua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Oil and Chi Hua.

Diversification Opportunities for Prime Oil and Chi Hua

0.51

Correlation Coefficient

Prime Oil  Chi Hua

Very weak diversification

The 3 months correlation between Prime and Chi is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Prime Oil Chemical and Chi Hua Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chi Hua Fitness and Prime Oil 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 Prime Oil Chemical are associated (or correlated) with Chi Hua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chi Hua Fitness has no effect on the direction of Prime Oil i.e., Prime Oil and Chi Hua go up and down completely randomly.

Pair Corralation between Prime Oil and Chi Hua

Assuming the 90 days trading horizon Prime Oil Chemical is expected to generate 0.72 times more return on investment than Chi Hua. However, Prime Oil Chemical is 1.38 times less risky than Chi Hua. It trades about 0.18 of its potential returns per unit of risk. Chi Hua Fitness is currently generating about 0.1 per unit of risk. If you would invest  1,780  in Prime Oil Chemical on December 20, 2024 and sell it today you would earn a total of  110.00  from holding Prime Oil Chemical or generate 6.18% return on investment over 90 days.

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

Prime Oil Chemical  vs.  Chi Hua Fitness

Prime Oil Chemical

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Oil Chemical are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Prime Oil may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Chi Hua Fitness

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chi Hua Fitness are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Chi Hua 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 Prime Oil and Chi Hua

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

The idea behind Prime Oil Chemical and Chi Hua Fitness 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.