Correlation Between Lier Chemical and Guizhou Chanhen

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Can any of the company-specific risk be diversified away by investing in both Lier Chemical and Guizhou Chanhen 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 Lier Chemical and Guizhou Chanhen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lier Chemical Co and Guizhou Chanhen Chemical, you can compare the effects of market volatilities on Lier Chemical and Guizhou Chanhen 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 Lier Chemical with a short position of Guizhou Chanhen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lier Chemical and Guizhou Chanhen.

Diversification Opportunities for Lier Chemical and Guizhou Chanhen

LierGuizhouDiversified AwayLierGuizhouDiversified Away100%
0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Lier and Guizhou is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Lier Chemical Co and Guizhou Chanhen Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guizhou Chanhen Chemical and Lier 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 Lier Chemical Co are associated (or correlated) with Guizhou Chanhen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guizhou Chanhen Chemical has no effect on the direction of Lier Chemical i.e., Lier Chemical and Guizhou Chanhen go up and down completely randomly.

Pair Corralation between Lier Chemical and Guizhou Chanhen

Assuming the 90 days trading horizon Lier Chemical Co is expected to under-perform the Guizhou Chanhen. But the stock apears to be less risky and, when comparing its historical volatility, Lier Chemical Co is 1.27 times less risky than Guizhou Chanhen. The stock trades about -0.03 of its potential returns per unit of risk. The Guizhou Chanhen Chemical is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,100  in Guizhou Chanhen Chemical on September 28, 2024 and sell it today you would earn a total of  390.00  from holding Guizhou Chanhen Chemical or generate 18.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Lier Chemical Co  vs.  Guizhou Chanhen Chemical

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 05101520253035
JavaScript chart by amCharts 3.21.15002258 002895
       Timeline  
Lier Chemical 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Lier Chemical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Lier Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec7.588.599.5
Guizhou Chanhen Chemical 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Guizhou Chanhen Chemical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guizhou Chanhen sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec1819202122232425

Lier Chemical and Guizhou Chanhen Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-8.2-6.14-4.08-2.020.02.114.296.488.6610.84 0.020.030.040.05
JavaScript chart by amCharts 3.21.15002258 002895
       Returns  

Pair Trading with Lier Chemical and Guizhou Chanhen

The main advantage of trading using opposite Lier Chemical and Guizhou Chanhen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lier Chemical position performs unexpectedly, Guizhou Chanhen 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 Guizhou Chanhen will offset losses from the drop in Guizhou Chanhen's long position.
The idea behind Lier Chemical Co and Guizhou Chanhen Chemical 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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