Correlation Between HF Sinclair and Sinopec Shanghai

Can any of the company-specific risk be diversified away by investing in both HF Sinclair and Sinopec Shanghai 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 HF Sinclair and Sinopec Shanghai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HF Sinclair Corp and Sinopec Shanghai Petrochemical, you can compare the effects of market volatilities on HF Sinclair and Sinopec Shanghai 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 HF Sinclair with a short position of Sinopec Shanghai. Check out your portfolio center. Please also check ongoing floating volatility patterns of HF Sinclair and Sinopec Shanghai.

Diversification Opportunities for HF Sinclair and Sinopec Shanghai

-0.05

Correlation Coefficient

HF Sinclair  Sinopec Shanghai

Good diversification

The 3 months correlation between DINO and Sinopec is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding HF Sinclair Corp and Sinopec Shanghai Petrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinopec Shanghai Pet and HF Sinclair 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 HF Sinclair Corp are associated (or correlated) with Sinopec Shanghai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinopec Shanghai Pet has no effect on the direction of HF Sinclair i.e., HF Sinclair and Sinopec Shanghai go up and down completely randomly.

Pair Corralation between HF Sinclair and Sinopec Shanghai

Given the investment horizon of 90 days HF Sinclair Corp is expected to under-perform the Sinopec Shanghai. But the stock apears to be less risky and, when comparing its historical volatility, HF Sinclair Corp is 3.53 times less risky than Sinopec Shanghai. The stock trades about -0.55 of its potential returns per unit of risk. The Sinopec Shanghai Petrochemical is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Sinopec Shanghai Petrochemical on September 17, 2024 and sell it today you would earn a total of  2.00  from holding Sinopec Shanghai Petrochemical or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

HF Sinclair Corp  vs.  Sinopec Shanghai Petrochemical

HF Sinclair Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HF Sinclair Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Sinopec Shanghai Pet

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sinopec Shanghai Petrochemical are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking indicators, Sinopec Shanghai reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HF Sinclair and Sinopec Shanghai

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

The idea behind HF Sinclair Corp and Sinopec Shanghai Petrochemical 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.