Correlation Between Hengli Petrochemical and Wanhua Chemical

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Hengli Petrochemical and Wanhua Chemical 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 Wanhua Chemical 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 Wanhua Chemical Group, you can compare the effects of market volatilities on Hengli Petrochemical and Wanhua Chemical 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 Wanhua Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hengli Petrochemical and Wanhua Chemical.

Diversification Opportunities for Hengli Petrochemical and Wanhua Chemical

HengliWanhuaDiversified AwayHengliWanhuaDiversified Away100%
0.29
  Correlation Coefficient

Modest diversification

The 3 months correlation between Hengli and Wanhua is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Hengli Petrochemical Co and Wanhua Chemical Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wanhua Chemical Group 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 Wanhua Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wanhua Chemical Group has no effect on the direction of Hengli Petrochemical i.e., Hengli Petrochemical and Wanhua Chemical go up and down completely randomly.

Pair Corralation between Hengli Petrochemical and Wanhua Chemical

Assuming the 90 days trading horizon Hengli Petrochemical Co is expected to generate 0.99 times more return on investment than Wanhua Chemical. However, Hengli Petrochemical Co is 1.01 times less risky than Wanhua Chemical. It trades about -0.01 of its potential returns per unit of risk. Wanhua Chemical Group is currently generating about -0.17 per unit of risk. If you would invest  1,566  in Hengli Petrochemical Co on September 28, 2024 and sell it today you would lose (38.00) from holding Hengli Petrochemical Co or give up 2.43% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Hengli Petrochemical Co  vs.  Wanhua Chemical Group

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -5051015202530
JavaScript chart by amCharts 3.21.15600346 600309
       Timeline  
Hengli Petrochemical 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec1414.51515.51616.517
Wanhua Chemical Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Wanhua Chemical Group 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec7580859095100

Hengli Petrochemical and Wanhua Chemical Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-7.43-5.57-3.7-1.840.01.963.965.957.94 0.020.030.040.050.060.07
JavaScript chart by amCharts 3.21.15600346 600309
       Returns  

Pair Trading with Hengli Petrochemical and Wanhua Chemical

The main advantage of trading using opposite Hengli Petrochemical and Wanhua Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hengli Petrochemical position performs unexpectedly, Wanhua Chemical 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 Wanhua Chemical will offset losses from the drop in Wanhua Chemical's long position.
The idea behind Hengli Petrochemical Co and Wanhua Chemical Group 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.
Check out your portfolio center.
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 Global Correlations module to find global opportunities by holding instruments from different markets.

Other Complementary Tools

USA ETFs
Find actively traded Exchange Traded Funds (ETF) in USA
Commodity Channel
Use Commodity Channel Index to analyze current equity momentum
Watchlist Optimization
Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm
Technical Analysis
Check basic technical indicators and analysis based on most latest market data
ETF Categories
List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments