Correlation Between Dymatic Chemicals and Bright Dairy

Can any of the company-specific risk be diversified away by investing in both Dymatic Chemicals and Bright Dairy 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 Dymatic Chemicals and Bright Dairy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dymatic Chemicals and Bright Dairy Food, you can compare the effects of market volatilities on Dymatic Chemicals and Bright Dairy 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 Dymatic Chemicals with a short position of Bright Dairy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dymatic Chemicals and Bright Dairy.

Diversification Opportunities for Dymatic Chemicals and Bright Dairy

0.58

Correlation Coefficient

Dymatic Chemicals  Bright Dairy

Very weak diversification

The 3 months correlation between Dymatic and Bright is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Dymatic Chemicals and Bright Dairy Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Dairy Food and Dymatic Chemicals 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 Dymatic Chemicals are associated (or correlated) with Bright Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Dairy Food has no effect on the direction of Dymatic Chemicals i.e., Dymatic Chemicals and Bright Dairy go up and down completely randomly.

Pair Corralation between Dymatic Chemicals and Bright Dairy

Assuming the 90 days trading horizon Dymatic Chemicals is expected to generate 1.47 times more return on investment than Bright Dairy. However, Dymatic Chemicals is 1.47 times more volatile than Bright Dairy Food. It trades about 0.01 of its potential returns per unit of risk. Bright Dairy Food is currently generating about -0.07 per unit of risk. If you would invest  627.00  in Dymatic Chemicals on December 5, 2024 and sell it today you would lose (3.00) from holding Dymatic Chemicals or give up 0.48% of portfolio value over 90 days.

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

Dymatic Chemicals  vs.  Bright Dairy Food

Dymatic Chemicals

Risk-Adjusted Performance

Weak

Over the last 90 days Dymatic Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dymatic Chemicals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bright Dairy Food

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bright Dairy Food has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Dymatic Chemicals and Bright Dairy

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

The idea behind Dymatic Chemicals and Bright Dairy Food 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.