Correlation Between Anhui Jinhe and Rongsheng Petrochemical

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

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

Diversification Opportunities for Anhui Jinhe and Rongsheng Petrochemical

0.83

Correlation Coefficient

Anhui Jinhe  Rongsheng Petrochemical

Very poor diversification

The 3 months correlation between Anhui and Rongsheng is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Jinhe Industrial and Rongsheng Petrochemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rongsheng Petrochemical and Anhui Jinhe 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 Anhui Jinhe Industrial are associated (or correlated) with Rongsheng Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rongsheng Petrochemical has no effect on the direction of Anhui Jinhe i.e., Anhui Jinhe and Rongsheng Petrochemical go up and down completely randomly.

Pair Corralation between Anhui Jinhe and Rongsheng Petrochemical

Assuming the 90 days trading horizon Anhui Jinhe is expected to generate 2.61 times less return on investment than Rongsheng Petrochemical. In addition to that, Anhui Jinhe is 1.17 times more volatile than Rongsheng Petrochemical Co. It trades about 0.02 of its total potential returns per unit of risk. Rongsheng Petrochemical Co is currently generating about 0.06 per unit of volatility. If you would invest  849.00  in Rongsheng Petrochemical Co on September 21, 2024 and sell it today you would earn a total of  61.00  from holding Rongsheng Petrochemical Co or generate 7.18% return on investment over 90 days.

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

Anhui Jinhe Industrial  vs.  Rongsheng Petrochemical Co

Anhui Jinhe Industrial

Risk-Adjusted Performance

1 of 100

Weak

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

Rongsheng Petrochemical

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rongsheng Petrochemical Co are ranked lower than 4 (%) 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.

Pair Trading with Anhui Jinhe and Rongsheng Petrochemical

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

The idea behind Anhui Jinhe Industrial and Rongsheng Petrochemical Co 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.

Check out your portfolio center.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .