Correlation Between Sichuan Teway and China Petroleum

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

By analyzing existing cross correlation between Sichuan Teway Food and China Petroleum Chemical, you can compare the effects of market volatilities on Sichuan Teway and China Petroleum 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 Sichuan Teway with a short position of China Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sichuan Teway and China Petroleum.

Diversification Opportunities for Sichuan Teway and China Petroleum

-0.28

Correlation Coefficient

Sichuan Teway  China Petroleum

Very good diversification

The 3 months correlation between Sichuan and China is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Teway Food and China Petroleum Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Petroleum Chemical and Sichuan Teway 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 Sichuan Teway Food are associated (or correlated) with China Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Petroleum Chemical has no effect on the direction of Sichuan Teway i.e., Sichuan Teway and China Petroleum go up and down completely randomly.

Pair Corralation between Sichuan Teway and China Petroleum

Assuming the 90 days trading horizon Sichuan Teway Food is expected to generate 1.95 times more return on investment than China Petroleum. However, Sichuan Teway is 1.95 times more volatile than China Petroleum Chemical. It trades about 0.27 of its potential returns per unit of risk. China Petroleum Chemical is currently generating about 0.05 per unit of risk. If you would invest  880.00  in Sichuan Teway Food on September 12, 2024 and sell it today you would earn a total of  580.00  from holding Sichuan Teway Food or generate 65.91% return on investment over 90 days.

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

Sichuan Teway Food  vs.  China Petroleum Chemical

Sichuan Teway Food

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Teway Food are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Teway sustained solid returns over the last few months and may actually be approaching a breakup point.

China Petroleum Chemical

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Petroleum Chemical are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Sichuan Teway and China Petroleum

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

The idea behind Sichuan Teway Food and China Petroleum Chemical 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.