Correlation Between Sinopec Shanghai and Eneos Holdings

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

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

Diversification Opportunities for Sinopec Shanghai and Eneos Holdings

0.22

Correlation Coefficient

Sinopec Shanghai  Eneos Holdings

Modest diversification

The 3 months correlation between Sinopec and Eneos is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Sinopec Shanghai Petrochemical and Eneos Holdings ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eneos Holdings ADR and Sinopec Shanghai 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 Sinopec Shanghai Petrochemical are associated (or correlated) with Eneos Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eneos Holdings ADR has no effect on the direction of Sinopec Shanghai i.e., Sinopec Shanghai and Eneos Holdings go up and down completely randomly.

Pair Corralation between Sinopec Shanghai and Eneos Holdings

Assuming the 90 days horizon Sinopec Shanghai Petrochemical is expected to generate 0.96 times more return on investment than Eneos Holdings. However, Sinopec Shanghai Petrochemical is 1.04 times less risky than Eneos Holdings. It trades about 0.08 of its potential returns per unit of risk. Eneos Holdings ADR is currently generating about 0.02 per unit of risk. If you would invest  13.00  in Sinopec Shanghai Petrochemical on September 17, 2024 and sell it today you would earn a total of  3.00  from holding Sinopec Shanghai Petrochemical or generate 23.08% return on investment over 90 days.

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

Sinopec Shanghai Petrochemical  vs.  Eneos Holdings ADR

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.

Eneos Holdings ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eneos Holdings ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile essential indicators, Eneos Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sinopec Shanghai and Eneos Holdings

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

The idea behind Sinopec Shanghai Petrochemical and Eneos Holdings ADR 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.