Correlation Between China Petroleum and Sany Heavy

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

Diversification Opportunities for China Petroleum and Sany Heavy

0.65

Correlation Coefficient

China Petroleum  Sany Heavy

Poor diversification

The 3 months correlation between China and Sany is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding China Petroleum Chemical and Sany Heavy Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sany Heavy Energy 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 Sany Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sany Heavy Energy has no effect on the direction of China Petroleum i.e., China Petroleum and Sany Heavy go up and down completely randomly.

Pair Corralation between China Petroleum and Sany Heavy

Assuming the 90 days trading horizon China Petroleum Chemical is expected to generate 0.63 times more return on investment than Sany Heavy. However, China Petroleum Chemical is 1.59 times less risky than Sany Heavy. It trades about -0.21 of its potential returns per unit of risk. Sany Heavy Energy is currently generating about -0.23 per unit of risk. If you would invest  644.00  in China Petroleum Chemical on December 11, 2024 and sell it today you would lose (75.00) from holding China Petroleum Chemical or give up 11.65% of portfolio value over 90 days.

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

China Petroleum Chemical  vs.  Sany Heavy Energy

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Sany Heavy Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sany Heavy Energy 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with China Petroleum and Sany Heavy

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

The idea behind China Petroleum Chemical and Sany Heavy Energy 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..