Correlation Between Shandong Polymer and Do Fluoride

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

Diversification Opportunities for Shandong Polymer and Do Fluoride

0.72

Correlation Coefficient

Shandong Polymer  Do Fluoride

Poor diversification

The 3 months correlation between Shandong and 002407 is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Polymer Biochemicals and Do Fluoride Chemicals Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Do Fluoride 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 Do Fluoride. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Do Fluoride Chemicals has no effect on the direction of Shandong Polymer i.e., Shandong Polymer and Do Fluoride go up and down completely randomly.

Pair Corralation between Shandong Polymer and Do Fluoride

Assuming the 90 days trading horizon Shandong Polymer Biochemicals is expected to generate 1.04 times more return on investment than Do Fluoride. However, Shandong Polymer is 1.04 times more volatile than Do Fluoride Chemicals Co. It trades about 0.12 of its potential returns per unit of risk. Do Fluoride Chemicals Co is currently generating about -0.02 per unit of risk. If you would invest  416.00  in Shandong Polymer Biochemicals on December 26, 2024 and sell it today you would earn a total of  50.00  from holding Shandong Polymer Biochemicals or generate 12.02% return on investment over 90 days.

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

Shandong Polymer Biochemicals  vs.  Do Fluoride Chemicals Co

Shandong Polymer Bio

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Polymer Biochemicals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Polymer sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Shandong Polymer and Do Fluoride

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

The idea behind Shandong Polymer Biochemicals and Do Fluoride Chemicals 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.