Correlation Between Southern Petrochemicals and Arrow Greentech

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

By analyzing existing cross correlation between Southern Petrochemicals Industries and Arrow Greentech Limited, you can compare the effects of market volatilities on Southern Petrochemicals and Arrow Greentech 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 Southern Petrochemicals with a short position of Arrow Greentech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Petrochemicals and Arrow Greentech.

Diversification Opportunities for Southern Petrochemicals and Arrow Greentech

-0.22

Correlation Coefficient

Southern Petrochemicals  Arrow Greentech

Very good diversification

The 3 months correlation between Southern and Arrow is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Southern Petrochemicals Indust and Arrow Greentech Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Greentech and Southern Petrochemicals 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 Southern Petrochemicals Industries are associated (or correlated) with Arrow Greentech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Greentech has no effect on the direction of Southern Petrochemicals i.e., Southern Petrochemicals and Arrow Greentech go up and down completely randomly.

Pair Corralation between Southern Petrochemicals and Arrow Greentech

Assuming the 90 days trading horizon Southern Petrochemicals Industries is expected to generate 0.61 times more return on investment than Arrow Greentech. However, Southern Petrochemicals Industries is 1.64 times less risky than Arrow Greentech. It trades about 0.15 of its potential returns per unit of risk. Arrow Greentech Limited is currently generating about -0.12 per unit of risk. If you would invest  7,271  in Southern Petrochemicals Industries on September 21, 2024 and sell it today you would earn a total of  360.00  from holding Southern Petrochemicals Industries or generate 4.95% return on investment over 90 days.

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

Southern Petrochemicals Indust  vs.  Arrow Greentech Limited

Southern Petrochemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Petrochemicals Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Arrow Greentech

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Greentech Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain technical and fundamental indicators, Arrow Greentech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Southern Petrochemicals and Arrow Greentech

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

The idea behind Southern Petrochemicals Industries and Arrow Greentech Limited 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.