Correlation Between China Petroleum and Industrial

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

Diversification Opportunities for China Petroleum and Industrial

0.48

Correlation Coefficient

China Petroleum  Industrial

Very weak diversification

The 3 months correlation between China and Industrial is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding China Petroleum Chemical and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial 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 Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of China Petroleum i.e., China Petroleum and Industrial go up and down completely randomly.

Pair Corralation between China Petroleum and Industrial

Assuming the 90 days trading horizon China Petroleum Chemical is expected to under-perform the Industrial. In addition to that, China Petroleum is 1.27 times more volatile than Industrial and Commercial. It trades about -0.06 of its total potential returns per unit of risk. Industrial and Commercial is currently generating about 0.05 per unit of volatility. If you would invest  594.00  in Industrial and Commercial on August 31, 2024 and sell it today you would earn a total of  25.00  from holding Industrial and Commercial or generate 4.21% return on investment over 90 days.

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

China Petroleum Chemical  vs.  Industrial and Commercial

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Industrial and Commercial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Petroleum and Industrial

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

The idea behind China Petroleum Chemical and Industrial and Commercial 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.