Correlation Between China Petroleum and Sungrow Power

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

Diversification Opportunities for China Petroleum and Sungrow Power

0.23

Correlation Coefficient

China Petroleum  Sungrow Power

Modest diversification

The 3 months correlation between China and Sungrow is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding China Petroleum Chemical and Sungrow Power Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sungrow Power Supply 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 Sungrow Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sungrow Power Supply has no effect on the direction of China Petroleum i.e., China Petroleum and Sungrow Power go up and down completely randomly.

Pair Corralation between China Petroleum and Sungrow Power

Assuming the 90 days trading horizon China Petroleum Chemical is expected to generate 0.62 times more return on investment than Sungrow Power. However, China Petroleum Chemical is 1.6 times less risky than Sungrow Power. It trades about 0.04 of its potential returns per unit of risk. Sungrow Power Supply is currently generating about -0.23 per unit of risk. If you would invest  647.00  in China Petroleum Chemical on October 10, 2024 and sell it today you would earn a total of  6.00  from holding China Petroleum Chemical or generate 0.93% return on investment over 90 days.

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

China Petroleum Chemical  vs.  Sungrow Power Supply

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.

Sungrow Power Supply

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sungrow Power Supply 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with China Petroleum and Sungrow Power

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

The idea behind China Petroleum Chemical and Sungrow Power Supply 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 Anywhere module to track or share privately all of your investments from the convenience of any device.