Correlation Between Rongsheng Petrochemical and JCHX Mining

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

By analyzing existing cross correlation between Rongsheng Petrochemical Co and JCHX Mining Management, you can compare the effects of market volatilities on Rongsheng Petrochemical and JCHX Mining 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 Rongsheng Petrochemical with a short position of JCHX Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rongsheng Petrochemical and JCHX Mining.

Diversification Opportunities for Rongsheng Petrochemical and JCHX Mining

0.52

Correlation Coefficient

Rongsheng Petrochemical  JCHX Mining

Very weak diversification

The 3 months correlation between Rongsheng and JCHX is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Rongsheng Petrochemical Co and JCHX Mining Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JCHX Mining Management and Rongsheng Petrochemical 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 Rongsheng Petrochemical Co are associated (or correlated) with JCHX Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JCHX Mining Management has no effect on the direction of Rongsheng Petrochemical i.e., Rongsheng Petrochemical and JCHX Mining go up and down completely randomly.

Pair Corralation between Rongsheng Petrochemical and JCHX Mining

Assuming the 90 days trading horizon Rongsheng Petrochemical Co is expected to generate 0.69 times more return on investment than JCHX Mining. However, Rongsheng Petrochemical Co is 1.46 times less risky than JCHX Mining. It trades about 0.09 of its potential returns per unit of risk. JCHX Mining Management is currently generating about 0.02 per unit of risk. If you would invest  864.00  in Rongsheng Petrochemical Co on September 2, 2024 and sell it today you would earn a total of  90.00  from holding Rongsheng Petrochemical Co or generate 10.42% return on investment over 90 days.

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

Rongsheng Petrochemical Co  vs.  JCHX Mining Management

Rongsheng Petrochemical

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rongsheng Petrochemical Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Rongsheng Petrochemical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

JCHX Mining Management

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JCHX Mining Management are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, JCHX Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rongsheng Petrochemical and JCHX Mining

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

The idea behind Rongsheng Petrochemical Co and JCHX Mining Management 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.