Correlation Between Lier Chemical and Xinjiang Daqo
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By analyzing existing cross correlation between Lier Chemical Co and Xinjiang Daqo New, you can compare the effects of market volatilities on Lier Chemical and Xinjiang Daqo 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 Xinjiang Daqo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lier Chemical and Xinjiang Daqo.
Diversification Opportunities for Lier Chemical and Xinjiang Daqo
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lier and Xinjiang is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Lier Chemical Co and Xinjiang Daqo New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinjiang Daqo New 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 Xinjiang Daqo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinjiang Daqo New has no effect on the direction of Lier Chemical i.e., Lier Chemical and Xinjiang Daqo go up and down completely randomly.
Pair Corralation between Lier Chemical and Xinjiang Daqo
Assuming the 90 days trading horizon Lier Chemical Co is expected to under-perform the Xinjiang Daqo. But the stock apears to be less risky and, when comparing its historical volatility, Lier Chemical Co is 1.48 times less risky than Xinjiang Daqo. The stock trades about -0.07 of its potential returns per unit of risk. The Xinjiang Daqo New is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 4,345 in Xinjiang Daqo New on September 20, 2024 and sell it today you would lose (1,832) from holding Xinjiang Daqo New or give up 42.16% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Lier Chemical Co vs. Xinjiang Daqo New
Performance |
Timeline |
Lier Chemical |
Xinjiang Daqo New |
Lier Chemical and Xinjiang Daqo Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lier Chemical and Xinjiang Daqo
The main advantage of trading using opposite Lier Chemical and Xinjiang Daqo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lier Chemical position performs unexpectedly, Xinjiang Daqo 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 Xinjiang Daqo will offset losses from the drop in Xinjiang Daqo's long position.Lier Chemical vs. Zijin Mining Group | Lier Chemical vs. Wanhua Chemical Group | Lier Chemical vs. Baoshan Iron Steel | Lier Chemical vs. Shandong Gold Mining |
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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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