Correlation Between China Petroleum and Heilongjiang Publishing

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

Diversification Opportunities for China Petroleum and Heilongjiang Publishing

-0.28

Correlation Coefficient

China Petroleum  Heilongjiang Publishing

Very good diversification

The 3 months correlation between China and Heilongjiang is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding China Petroleum Chemical and Heilongjiang Publishing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heilongjiang 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 Heilongjiang Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heilongjiang Publishing has no effect on the direction of China Petroleum i.e., China Petroleum and Heilongjiang Publishing go up and down completely randomly.

Pair Corralation between China Petroleum and Heilongjiang Publishing

Assuming the 90 days trading horizon China Petroleum Chemical is expected to under-perform the Heilongjiang Publishing. But the stock apears to be less risky and, when comparing its historical volatility, China Petroleum Chemical is 2.35 times less risky than Heilongjiang Publishing. The stock trades about -0.01 of its potential returns per unit of risk. The Heilongjiang Publishing Media is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,358  in Heilongjiang Publishing Media on September 26, 2024 and sell it today you would earn a total of  192.00  from holding Heilongjiang Publishing Media or generate 14.14% return on investment over 90 days.

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

China Petroleum Chemical  vs.  Heilongjiang Publishing 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.

Heilongjiang Publishing

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Heilongjiang Publishing Media are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Heilongjiang Publishing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Petroleum and Heilongjiang Publishing

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

The idea behind China Petroleum Chemical and Heilongjiang Publishing 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.