Correlation Between Changchun BCHT and Hengli Petrochemical

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

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

Diversification Opportunities for Changchun BCHT and Hengli Petrochemical

-0.07

Correlation Coefficient

Changchun BCHT  Hengli Petrochemical

Good diversification

The 3 months correlation between Changchun and Hengli is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Changchun BCHT Biotechnology and Hengli Petrochemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengli Petrochemical and Changchun BCHT 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 Changchun BCHT Biotechnology are associated (or correlated) with Hengli Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengli Petrochemical has no effect on the direction of Changchun BCHT i.e., Changchun BCHT and Hengli Petrochemical go up and down completely randomly.

Pair Corralation between Changchun BCHT and Hengli Petrochemical

Assuming the 90 days trading horizon Changchun BCHT Biotechnology is expected to under-perform the Hengli Petrochemical. In addition to that, Changchun BCHT is 2.05 times more volatile than Hengli Petrochemical Co. It trades about -0.32 of its total potential returns per unit of risk. Hengli Petrochemical Co is currently generating about -0.08 per unit of volatility. If you would invest  1,519  in Hengli Petrochemical Co on October 21, 2024 and sell it today you would lose (25.00) from holding Hengli Petrochemical Co or give up 1.65% of portfolio value over 90 days.

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

Changchun BCHT Biotechnology  vs.  Hengli Petrochemical Co

Changchun BCHT Biote

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Changchun BCHT Biotechnology 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hengli Petrochemical

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hengli Petrochemical Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Changchun BCHT and Hengli Petrochemical

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

The idea behind Changchun BCHT Biotechnology and Hengli Petrochemical Co 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.