Correlation Between AIR PRODCHEMICALS and Sinopec Oilfield

Can any of the company-specific risk be diversified away by investing in both AIR PRODCHEMICALS and Sinopec Oilfield 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 AIR PRODCHEMICALS and Sinopec Oilfield into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AIR PRODCHEMICALS and Sinopec Oilfield Service, you can compare the effects of market volatilities on AIR PRODCHEMICALS and Sinopec Oilfield 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 AIR PRODCHEMICALS with a short position of Sinopec Oilfield. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIR PRODCHEMICALS and Sinopec Oilfield.

Diversification Opportunities for AIR PRODCHEMICALS and Sinopec Oilfield

0.46

Correlation Coefficient

AIR PRODCHEMICALS  Sinopec Oilfield

Very weak diversification

The 3 months correlation between AIR and Sinopec is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding AIR PRODCHEMICALS and Sinopec Oilfield Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinopec Oilfield Service and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS are associated (or correlated) with Sinopec Oilfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinopec Oilfield Service has no effect on the direction of AIR PRODCHEMICALS i.e., AIR PRODCHEMICALS and Sinopec Oilfield go up and down completely randomly.

Pair Corralation between AIR PRODCHEMICALS and Sinopec Oilfield

Assuming the 90 days trading horizon AIR PRODCHEMICALS is expected to under-perform the Sinopec Oilfield. But the stock apears to be less risky and, when comparing its historical volatility, AIR PRODCHEMICALS is 1.92 times less risky than Sinopec Oilfield. The stock trades about -0.01 of its potential returns per unit of risk. The Sinopec Oilfield Service is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  7.05  in Sinopec Oilfield Service on December 29, 2024 and sell it today you would lose (0.05) from holding Sinopec Oilfield Service or give up 0.71% of portfolio value over 90 days.

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

AIR PRODCHEMICALS  vs.  Sinopec Oilfield Service

AIR PRODCHEMICALS

Risk-Adjusted Performance

Very Weak

Over the last 90 days AIR PRODCHEMICALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AIR PRODCHEMICALS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Sinopec Oilfield Service

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sinopec Oilfield Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sinopec Oilfield is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AIR PRODCHEMICALS and Sinopec Oilfield

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

The idea behind AIR PRODCHEMICALS and Sinopec Oilfield Service 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.