Correlation Between China Petroleum and Minmetals Capital

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

Diversification Opportunities for China Petroleum and Minmetals Capital

0.4

Correlation Coefficient

China Petroleum  Minmetals Capital

Very weak diversification

The 3 months correlation between China and Minmetals is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding China Petroleum Chemical and Minmetals Capital Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Minmetals Capital 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 Minmetals Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Minmetals Capital has no effect on the direction of China Petroleum i.e., China Petroleum and Minmetals Capital go up and down completely randomly.

Pair Corralation between China Petroleum and Minmetals Capital

Assuming the 90 days trading horizon China Petroleum is expected to generate 2.32 times less return on investment than Minmetals Capital. But when comparing it to its historical volatility, China Petroleum Chemical is 1.57 times less risky than Minmetals Capital. It trades about 0.02 of its potential returns per unit of risk. Minmetals Capital Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  533.00  in Minmetals Capital Co on November 27, 2024 and sell it today you would earn a total of  77.00  from holding Minmetals Capital Co or generate 14.45% return on investment over 90 days.

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

China Petroleum Chemical  vs.  Minmetals Capital Co

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Minmetals Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Minmetals Capital Co 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 March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with China Petroleum and Minmetals Capital

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

The idea behind China Petroleum Chemical and Minmetals Capital Co 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.