Correlation Between China Petroleum and Guangzhou Ruoyuchen

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

Diversification Opportunities for China Petroleum and Guangzhou Ruoyuchen

-0.5

Correlation Coefficient

China Petroleum  Guangzhou Ruoyuchen

Very good diversification

The 3 months correlation between China and Guangzhou is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding China Petroleum Chemical and Guangzhou Ruoyuchen Informatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Ruoyuchen 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 Guangzhou Ruoyuchen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Ruoyuchen has no effect on the direction of China Petroleum i.e., China Petroleum and Guangzhou Ruoyuchen go up and down completely randomly.

Pair Corralation between China Petroleum and Guangzhou Ruoyuchen

Assuming the 90 days trading horizon China Petroleum Chemical is expected to under-perform the Guangzhou Ruoyuchen. But the stock apears to be less risky and, when comparing its historical volatility, China Petroleum Chemical is 5.23 times less risky than Guangzhou Ruoyuchen. The stock trades about -0.29 of its potential returns per unit of risk. The Guangzhou Ruoyuchen Information is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,890  in Guangzhou Ruoyuchen Information on December 27, 2024 and sell it today you would earn a total of  1,201  from holding Guangzhou Ruoyuchen Information or generate 41.56% return on investment over 90 days.

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

China Petroleum Chemical  vs.  Guangzhou Ruoyuchen Informatio

China Petroleum Chemical

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Guangzhou Ruoyuchen

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Ruoyuchen Information are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Ruoyuchen sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Petroleum and Guangzhou Ruoyuchen

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

The idea behind China Petroleum Chemical and Guangzhou Ruoyuchen Information 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.