Correlation Between China Petroleum and Tangel Publishing

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

Diversification Opportunities for China Petroleum and Tangel Publishing

-0.17

Correlation Coefficient

China Petroleum  Tangel Publishing

Good diversification

The 3 months correlation between China and Tangel is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding China Petroleum Chemical and Tangel Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tangel Publishing 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 Tangel Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tangel Publishing has no effect on the direction of China Petroleum i.e., China Petroleum and Tangel Publishing go up and down completely randomly.

Pair Corralation between China Petroleum and Tangel Publishing

Assuming the 90 days trading horizon China Petroleum Chemical is expected to under-perform the Tangel Publishing. But the stock apears to be less risky and, when comparing its historical volatility, China Petroleum Chemical is 3.95 times less risky than Tangel Publishing. The stock trades about -0.08 of its potential returns per unit of risk. The Tangel Publishing is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  405.00  in Tangel Publishing on October 22, 2024 and sell it today you would lose (37.00) from holding Tangel Publishing or give up 9.14% of portfolio value over 90 days.

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

China Petroleum Chemical  vs.  Tangel Publishing

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.

Tangel Publishing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tangel Publishing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Tangel Publishing 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 Tangel Publishing

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

The idea behind China Petroleum Chemical and Tangel Publishing 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.