Correlation Between China Petroleum and Jinzai Food

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

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

Diversification Opportunities for China Petroleum and Jinzai Food

0.75

Correlation Coefficient

China Petroleum  Jinzai Food

Poor diversification

The 3 months correlation between China and Jinzai is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding China Petroleum Chemical and Jinzai Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinzai Food Group and China Petroleum 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 Petroleum Chemical are associated (or correlated) with Jinzai Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinzai Food Group has no effect on the direction of China Petroleum i.e., China Petroleum and Jinzai Food go up and down completely randomly.

Pair Corralation between China Petroleum and Jinzai Food

Assuming the 90 days trading horizon China Petroleum Chemical is expected to under-perform the Jinzai Food. But the stock apears to be less risky and, when comparing its historical volatility, China Petroleum Chemical is 2.25 times less risky than Jinzai Food. The stock trades about -0.09 of its potential returns per unit of risk. The Jinzai Food Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,261  in Jinzai Food Group on October 24, 2024 and sell it today you would lose (8.00) from holding Jinzai Food Group or give up 0.63% of portfolio value over 90 days.

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

China Petroleum Chemical  vs.  Jinzai Food Group

China Petroleum Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Petroleum Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Petroleum is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jinzai Food Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jinzai Food Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jinzai Food is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Petroleum and Jinzai Food

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

The idea behind China Petroleum Chemical and Jinzai Food Group 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.