Correlation Between Shandong Polymer and Dymatic Chemicals

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

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

Diversification Opportunities for Shandong Polymer and Dymatic Chemicals

0.63

Correlation Coefficient

Shandong Polymer  Dymatic Chemicals

Poor diversification

The 3 months correlation between Shandong and Dymatic is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Polymer Biochemicals and Dymatic Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dymatic Chemicals and Shandong Polymer 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 Shandong Polymer Biochemicals are associated (or correlated) with Dymatic Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dymatic Chemicals has no effect on the direction of Shandong Polymer i.e., Shandong Polymer and Dymatic Chemicals go up and down completely randomly.

Pair Corralation between Shandong Polymer and Dymatic Chemicals

Assuming the 90 days trading horizon Shandong Polymer Biochemicals is expected to under-perform the Dymatic Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Polymer Biochemicals is 1.09 times less risky than Dymatic Chemicals. The stock trades about -0.32 of its potential returns per unit of risk. The Dymatic Chemicals is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  627.00  in Dymatic Chemicals on October 6, 2024 and sell it today you would lose (76.00) from holding Dymatic Chemicals or give up 12.12% of portfolio value over 90 days.

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

Shandong Polymer Biochemicals  vs.  Dymatic Chemicals

Shandong Polymer Bio

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dymatic Chemicals

Risk-Adjusted Performance

0 of 100

Very 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.

Pair Trading with Shandong Polymer and Dymatic Chemicals

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

The idea behind Shandong Polymer Biochemicals and Dymatic Chemicals 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .