Correlation Between TSRC Corp and China Petrochemical

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

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

Diversification Opportunities for TSRC Corp and China Petrochemical

0.69

Correlation Coefficient

TSRC Corp  China Petrochemical

Poor diversification

The 3 months correlation between TSRC and China is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding TSRC Corp and China Petrochemical Developmen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Petrochemical and TSRC Corp 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 TSRC Corp are associated (or correlated) with China Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Petrochemical has no effect on the direction of TSRC Corp i.e., TSRC Corp and China Petrochemical go up and down completely randomly.

Pair Corralation between TSRC Corp and China Petrochemical

Assuming the 90 days trading horizon TSRC Corp is expected to under-perform the China Petrochemical. But the stock apears to be less risky and, when comparing its historical volatility, TSRC Corp is 1.07 times less risky than China Petrochemical. The stock trades about -0.01 of its potential returns per unit of risk. The China Petrochemical Development is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,027  in China Petrochemical Development on February 4, 2024 and sell it today you would earn a total of  108.00  from holding China Petrochemical Development or generate 10.52% return on investment over 90 days.

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

TSRC Corp  vs.  China Petrochemical Developmen

TSRC Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TSRC Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, TSRC Corp may actually be approaching a critical reversion point that can send shares even higher in June 2024.

China Petrochemical

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Petrochemical Development are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, China Petrochemical showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TSRC Corp and China Petrochemical

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

The idea behind TSRC Corp and China Petrochemical Development 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.