Correlation Between Do Fluoride and Shanghai Shuixing

Can any of the company-specific risk be diversified away by investing in both Do Fluoride and Shanghai Shuixing 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 Do Fluoride and Shanghai Shuixing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Do Fluoride Chemicals Co and Shanghai Shuixing Home, you can compare the effects of market volatilities on Do Fluoride and Shanghai Shuixing 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 Do Fluoride with a short position of Shanghai Shuixing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Do Fluoride and Shanghai Shuixing.

Diversification Opportunities for Do Fluoride and Shanghai Shuixing

0.26

Correlation Coefficient

Do Fluoride  Shanghai Shuixing

Modest diversification

The 3 months correlation between 002407 and Shanghai is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Do Fluoride Chemicals Co and Shanghai Shuixing Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Shuixing Home and Do Fluoride 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 Do Fluoride Chemicals Co are associated (or correlated) with Shanghai Shuixing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Shuixing Home has no effect on the direction of Do Fluoride i.e., Do Fluoride and Shanghai Shuixing go up and down completely randomly.

Pair Corralation between Do Fluoride and Shanghai Shuixing

Assuming the 90 days trading horizon Do Fluoride Chemicals Co is expected to generate 0.84 times more return on investment than Shanghai Shuixing. However, Do Fluoride Chemicals Co is 1.19 times less risky than Shanghai Shuixing. It trades about -0.03 of its potential returns per unit of risk. Shanghai Shuixing Home is currently generating about -0.05 per unit of risk. If you would invest  1,271  in Do Fluoride Chemicals Co on December 25, 2024 and sell it today you would lose (53.00) from holding Do Fluoride Chemicals Co or give up 4.17% of portfolio value over 90 days.

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

Do Fluoride Chemicals Co  vs.  Shanghai Shuixing Home

Do Fluoride Chemicals

Risk-Adjusted Performance

Very Weak

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

Shanghai Shuixing Home

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanghai Shuixing Home 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 Do Fluoride and Shanghai Shuixing

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

The idea behind Do Fluoride Chemicals Co and Shanghai Shuixing Home 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.