Correlation Between Sinopec Shanghai and FORTEC ELEKTRONIK

Can any of the company-specific risk be diversified away by investing in both Sinopec Shanghai and FORTEC ELEKTRONIK 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 FORTEC ELEKTRONIK 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 FORTEC ELEKTRONIK, you can compare the effects of market volatilities on Sinopec Shanghai and FORTEC ELEKTRONIK 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 FORTEC ELEKTRONIK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinopec Shanghai and FORTEC ELEKTRONIK.

Diversification Opportunities for Sinopec Shanghai and FORTEC ELEKTRONIK

-0.47

Correlation Coefficient

Sinopec Shanghai  FORTEC ELEKTRONIK

Very good diversification

The 3 months correlation between Sinopec and FORTEC is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Sinopec Shanghai Petrochemical and FORTEC ELEKTRONIK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FORTEC ELEKTRONIK 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 FORTEC ELEKTRONIK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FORTEC ELEKTRONIK has no effect on the direction of Sinopec Shanghai i.e., Sinopec Shanghai and FORTEC ELEKTRONIK go up and down completely randomly.

Pair Corralation between Sinopec Shanghai and FORTEC ELEKTRONIK

Assuming the 90 days trading horizon Sinopec Shanghai Petrochemical is expected to generate 1.47 times more return on investment than FORTEC ELEKTRONIK. However, Sinopec Shanghai is 1.47 times more volatile than FORTEC ELEKTRONIK. It trades about 0.05 of its potential returns per unit of risk. FORTEC ELEKTRONIK is currently generating about -0.04 per unit of risk. If you would invest  14.00  in Sinopec Shanghai Petrochemical on December 21, 2024 and sell it today you would earn a total of  1.00  from holding Sinopec Shanghai Petrochemical or generate 7.14% return on investment over 90 days.

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

Sinopec Shanghai Petrochemical  vs.  FORTEC ELEKTRONIK

Sinopec Shanghai Pet

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sinopec Shanghai Petrochemical are ranked lower than 3 (%) 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.

FORTEC ELEKTRONIK

Risk-Adjusted Performance

Very Weak

Over the last 90 days FORTEC ELEKTRONIK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Sinopec Shanghai and FORTEC ELEKTRONIK

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

The idea behind Sinopec Shanghai Petrochemical and FORTEC ELEKTRONIK 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.