Correlation Between Sinopec Shanghai and WESTERN COPPER

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

By analyzing existing cross correlation between Sinopec Shanghai Petrochemical and WESTERN PER, you can compare the effects of market volatilities on Sinopec Shanghai and WESTERN COPPER 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 Sinopec Shanghai with a short position of WESTERN COPPER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinopec Shanghai and WESTERN COPPER.

Diversification Opportunities for Sinopec Shanghai and WESTERN COPPER

-0.18

Correlation Coefficient

Sinopec Shanghai  WESTERN COPPER

Good diversification

The 3 months correlation between Sinopec and WESTERN is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Sinopec Shanghai Petrochemical and WESTERN PER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTERN COPPER and Sinopec Shanghai 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 Sinopec Shanghai Petrochemical are associated (or correlated) with WESTERN COPPER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTERN COPPER has no effect on the direction of Sinopec Shanghai i.e., Sinopec Shanghai and WESTERN COPPER go up and down completely randomly.

Pair Corralation between Sinopec Shanghai and WESTERN COPPER

Assuming the 90 days trading horizon Sinopec Shanghai Petrochemical is expected to generate 1.78 times more return on investment than WESTERN COPPER. However, Sinopec Shanghai is 1.78 times more volatile than WESTERN PER. It trades about 0.07 of its potential returns per unit of risk. WESTERN PER is currently generating about -0.02 per unit of risk. If you would invest  13.00  in Sinopec Shanghai Petrochemical on October 10, 2024 and sell it today you would earn a total of  2.00  from holding Sinopec Shanghai Petrochemical or generate 15.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Sinopec Shanghai Petrochemical  vs.  WESTERN PER

Sinopec Shanghai Pet

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sinopec Shanghai Petrochemical are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking indicators, Sinopec Shanghai reported solid returns over the last few months and may actually be approaching a breakup point.

WESTERN COPPER

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WESTERN PER has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, WESTERN COPPER is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sinopec Shanghai and WESTERN COPPER

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

The idea behind Sinopec Shanghai Petrochemical and WESTERN PER 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 Transaction History module to view history of all your transactions and understand their impact on performance.