Correlation Between Hengli Petrochemical and Time Publishing

Can any of the company-specific risk be diversified away by investing in both Hengli Petrochemical and Time 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 Hengli Petrochemical and Time Publishing 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 Time Publishing and, you can compare the effects of market volatilities on Hengli Petrochemical and Time 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 Hengli Petrochemical with a short position of Time Publishing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hengli Petrochemical and Time Publishing.

Diversification Opportunities for Hengli Petrochemical and Time Publishing

0.64

Correlation Coefficient

Hengli Petrochemical  Time Publishing

Poor diversification

The 3 months correlation between Hengli and Time is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Hengli Petrochemical Co and Time Publishing and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Time Publishing 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 Time Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Time Publishing has no effect on the direction of Hengli Petrochemical i.e., Hengli Petrochemical and Time Publishing go up and down completely randomly.

Pair Corralation between Hengli Petrochemical and Time Publishing

Assuming the 90 days trading horizon Hengli Petrochemical Co is expected to under-perform the Time Publishing. But the stock apears to be less risky and, when comparing its historical volatility, Hengli Petrochemical Co is 1.79 times less risky than Time Publishing. The stock trades about -0.01 of its potential returns per unit of risk. The Time Publishing and is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,051  in Time Publishing and on October 1, 2024 and sell it today you would lose (169.00) from holding Time Publishing and or give up 16.08% of portfolio value over 90 days.

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

Hengli Petrochemical Co  vs.  Time Publishing and

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 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.

Time Publishing

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hengli Petrochemical and Time Publishing

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

The idea behind Hengli Petrochemical Co and Time Publishing and 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.