Correlation Between China Petroleum and Blue Sail

Can any of the company-specific risk be diversified away by investing in both China Petroleum and Blue Sail 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 Blue Sail 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 Blue Sail Medical, you can compare the effects of market volatilities on China Petroleum and Blue Sail 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 Blue Sail. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Petroleum and Blue Sail.

Diversification Opportunities for China Petroleum and Blue Sail

-0.41

Correlation Coefficient

China Petroleum  Blue Sail

Very good diversification

The 3 months correlation between China and Blue is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding China Petroleum Chemical and Blue Sail Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Sail Medical 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 Blue Sail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Sail Medical has no effect on the direction of China Petroleum i.e., China Petroleum and Blue Sail go up and down completely randomly.

Pair Corralation between China Petroleum and Blue Sail

Assuming the 90 days trading horizon China Petroleum Chemical is expected to under-perform the Blue Sail. But the stock apears to be less risky and, when comparing its historical volatility, China Petroleum Chemical is 1.33 times less risky than Blue Sail. The stock trades about -0.03 of its potential returns per unit of risk. The Blue Sail Medical is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  452.00  in Blue Sail Medical on September 3, 2024 and sell it today you would earn a total of  106.00  from holding Blue Sail Medical or generate 23.45% return on investment over 90 days.

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

China Petroleum Chemical  vs.  Blue Sail Medical

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 somewhat strong basic indicators, China Petroleum is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Blue Sail Medical

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Sail Medical are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Blue Sail sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Petroleum and Blue Sail

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

The idea behind China Petroleum Chemical and Blue Sail Medical 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.