Correlation Between Soken Chemical and China Railway

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

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

Diversification Opportunities for Soken Chemical and China Railway

0.0

Correlation Coefficient

Soken Chemical  China Railway

Pay attention - limited upside

The 3 months correlation between Soken and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Soken Chemical Engineering and China Railway Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Constr and Soken Chemical 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 Soken Chemical Engineering are associated (or correlated) with China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Constr has no effect on the direction of Soken Chemical i.e., Soken Chemical and China Railway go up and down completely randomly.

Pair Corralation between Soken Chemical and China Railway

If you would invest  51.00  in China Railway Construction on September 5, 2024 and sell it today you would earn a total of  13.00  from holding China Railway Construction or generate 25.49% return on investment over 90 days.

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

Soken Chemical Engineering  vs.  China Railway Construction

Soken Chemical Engin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Soken Chemical Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Soken Chemical is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

China Railway Constr

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Railway Construction are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, China Railway reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Soken Chemical and China Railway

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

The idea behind Soken Chemical Engineering and China Railway Construction 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.