Correlation Between Penta-Ocean Construction and China BlueChemical
Can any of the company-specific risk be diversified away by investing in both Penta-Ocean Construction and China BlueChemical 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 Penta-Ocean Construction and China BlueChemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Penta Ocean Construction Co and China BlueChemical, you can compare the effects of market volatilities on Penta-Ocean Construction and China BlueChemical 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 Penta-Ocean Construction with a short position of China BlueChemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penta-Ocean Construction and China BlueChemical.
Diversification Opportunities for Penta-Ocean Construction and China BlueChemical
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Penta-Ocean and China is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Penta Ocean Construction Co and China BlueChemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China BlueChemical and Penta-Ocean Construction 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 Penta Ocean Construction Co are associated (or correlated) with China BlueChemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China BlueChemical has no effect on the direction of Penta-Ocean Construction i.e., Penta-Ocean Construction and China BlueChemical go up and down completely randomly.
Pair Corralation between Penta-Ocean Construction and China BlueChemical
Assuming the 90 days horizon Penta Ocean Construction Co is expected to under-perform the China BlueChemical. But the stock apears to be less risky and, when comparing its historical volatility, Penta Ocean Construction Co is 2.6 times less risky than China BlueChemical. The stock trades about -0.02 of its potential returns per unit of risk. The China BlueChemical is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 21.00 in China BlueChemical on September 5, 2024 and sell it today you would earn a total of 2.00 from holding China BlueChemical or generate 9.52% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Penta Ocean Construction Co vs. China BlueChemical
Performance |
Timeline |
Penta-Ocean Construction |
China BlueChemical |
Penta-Ocean Construction and China BlueChemical Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Penta-Ocean Construction and China BlueChemical
The main advantage of trading using opposite Penta-Ocean Construction and China BlueChemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penta-Ocean Construction position performs unexpectedly, China BlueChemical 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 BlueChemical will offset losses from the drop in China BlueChemical's long position.Penta-Ocean Construction vs. Transurban Group | Penta-Ocean Construction vs. Superior Plus Corp | Penta-Ocean Construction vs. NMI Holdings | Penta-Ocean Construction vs. Origin Agritech |
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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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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