Correlation Between Lier Chemical and Healthcare

Can any of the company-specific risk be diversified away by investing in both Lier Chemical and Healthcare 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 Healthcare 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 Healthcare Co, you can compare the effects of market volatilities on Lier Chemical and Healthcare 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 Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lier Chemical and Healthcare.

Diversification Opportunities for Lier Chemical and Healthcare

0.94

Correlation Coefficient

Lier Chemical  Healthcare

Almost no diversification

The 3 months correlation between Lier and Healthcare is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Lier Chemical Co and Healthcare Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare 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 Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare has no effect on the direction of Lier Chemical i.e., Lier Chemical and Healthcare go up and down completely randomly.

Pair Corralation between Lier Chemical and Healthcare

Assuming the 90 days trading horizon Lier Chemical Co is expected to under-perform the Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Lier Chemical Co is 1.14 times less risky than Healthcare. The stock trades about -0.05 of its potential returns per unit of risk. The Healthcare Co is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  707.00  in Healthcare Co on September 21, 2024 and sell it today you would earn a total of  55.00  from holding Healthcare Co or generate 7.78% return on investment over 90 days.

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

Lier Chemical Co  vs.  Healthcare Co

Lier Chemical

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lier Chemical Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lier Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Healthcare

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Healthcare sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lier Chemical and Healthcare

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

The idea behind Lier Chemical Co and Healthcare Co 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.