Correlation Between China Petrochemical and Nantex Industry

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

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

Diversification Opportunities for China Petrochemical and Nantex Industry

0.74

Correlation Coefficient

China Petrochemical  Nantex Industry

Poor diversification

The 3 months correlation between China and Nantex is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding China Petrochemical Developmen and Nantex Industry Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nantex Industry and China 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 China Petrochemical Development are associated (or correlated) with Nantex Industry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nantex Industry has no effect on the direction of China Petrochemical i.e., China Petrochemical and Nantex Industry go up and down completely randomly.

Pair Corralation between China Petrochemical and Nantex Industry

Assuming the 90 days trading horizon China Petrochemical Development is expected to under-perform the Nantex Industry. In addition to that, China Petrochemical is 1.16 times more volatile than Nantex Industry Co. It trades about -0.19 of its total potential returns per unit of risk. Nantex Industry Co is currently generating about -0.18 per unit of volatility. If you would invest  3,755  in Nantex Industry Co on September 15, 2024 and sell it today you would lose (555.00) from holding Nantex Industry Co or give up 14.78% of portfolio value over 90 days.

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

China Petrochemical Developmen  vs.  Nantex Industry Co

China Petrochemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Petrochemical Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Nantex Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nantex Industry Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with China Petrochemical and Nantex Industry

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

The idea behind China Petrochemical Development and Nantex Industry 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.

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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.