Correlation Between Hengli Petrochemical and Der International

Can any of the company-specific risk be diversified away by investing in both Hengli Petrochemical and Der International 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 Hengli Petrochemical and Der International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hengli Petrochemical Co and Der International Home, you can compare the effects of market volatilities on Hengli Petrochemical and Der International 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 Hengli Petrochemical with a short position of Der International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hengli Petrochemical and Der International.

Diversification Opportunities for Hengli Petrochemical and Der International

0.09

Correlation Coefficient

Hengli Petrochemical  Der International

Significant diversification

The 3 months correlation between Hengli and Der is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Hengli Petrochemical Co and Der International Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Der International Home and Hengli Petrochemical 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 Hengli Petrochemical Co are associated (or correlated) with Der International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Der International Home has no effect on the direction of Hengli Petrochemical i.e., Hengli Petrochemical and Der International go up and down completely randomly.

Pair Corralation between Hengli Petrochemical and Der International

Assuming the 90 days trading horizon Hengli Petrochemical Co is expected to generate 0.42 times more return on investment than Der International. However, Hengli Petrochemical Co is 2.39 times less risky than Der International. It trades about 0.01 of its potential returns per unit of risk. Der International Home is currently generating about -0.05 per unit of risk. If you would invest  1,496  in Hengli Petrochemical Co on October 12, 2024 and sell it today you would earn a total of  4.00  from holding Hengli Petrochemical Co or generate 0.27% return on investment over 90 days.

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

Hengli Petrochemical Co  vs.  Der International Home

Hengli Petrochemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hengli Petrochemical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hengli Petrochemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Der International Home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Der International Home 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.

Pair Trading with Hengli Petrochemical and Der International

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

The idea behind Hengli Petrochemical Co and Der International Home 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.