Correlation Between China Petroleum and Threes Company

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

Diversification Opportunities for China Petroleum and Threes Company

0.01

Correlation Coefficient

China Petroleum  Threes Company

Significant diversification

The 3 months correlation between China and Threes is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding China Petroleum Chemical and Threes Company Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Threes Company 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 Threes Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Threes Company has no effect on the direction of China Petroleum i.e., China Petroleum and Threes Company go up and down completely randomly.

Pair Corralation between China Petroleum and Threes Company

Assuming the 90 days trading horizon China Petroleum Chemical is expected to generate 0.3 times more return on investment than Threes Company. However, China Petroleum Chemical is 3.38 times less risky than Threes Company. It trades about 0.07 of its potential returns per unit of risk. Threes Company Media is currently generating about -0.26 per unit of risk. If you would invest  647.00  in China Petroleum Chemical on October 8, 2024 and sell it today you would earn a total of  10.00  from holding China Petroleum Chemical or generate 1.55% return on investment over 90 days.

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

China Petroleum Chemical  vs.  Threes Company Media

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.

Threes Company

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind China Petroleum Chemical and Threes Company Media 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.