Correlation Between China Petroleum and Unit

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

By analyzing existing cross correlation between China Petroleum Chemical and Unit Corporation, you can compare the effects of market volatilities on China Petroleum and Unit 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 China Petroleum with a short position of Unit. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Petroleum and Unit.

Diversification Opportunities for China Petroleum and Unit

-0.26

Correlation Coefficient

China Petroleum  Unit

Very good diversification

The 3 months correlation between China and Unit is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding China Petroleum Chemical and Unit Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unit and China Petroleum 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 China Petroleum Chemical are associated (or correlated) with Unit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unit has no effect on the direction of China Petroleum i.e., China Petroleum and Unit go up and down completely randomly.

Pair Corralation between China Petroleum and Unit

Assuming the 90 days horizon China Petroleum Chemical is expected to under-perform the Unit. But the pink sheet apears to be less risky and, when comparing its historical volatility, China Petroleum Chemical is 3.22 times less risky than Unit. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Unit Corporation is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Unit Corporation on August 30, 2024 and sell it today you would earn a total of  3.00  from holding Unit Corporation or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	66.67%
Values	Daily Returns

China Petroleum Chemical  vs.  Unit Corp.

China Petroleum Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Petroleum Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Unit

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Unit Corporation are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, Unit showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Petroleum and Unit

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

The idea behind China Petroleum Chemical and Unit Corporation 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.