Correlation Between COWAY and Lion Chemtech

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

By analyzing existing cross correlation between COWAY Co and Lion Chemtech Co, you can compare the effects of market volatilities on COWAY and Lion Chemtech 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 COWAY with a short position of Lion Chemtech. Check out your portfolio center. Please also check ongoing floating volatility patterns of COWAY and Lion Chemtech.

Diversification Opportunities for COWAY and Lion Chemtech

-0.57

Correlation Coefficient

COWAY  Lion Chemtech

Excellent diversification

The 3 months correlation between COWAY and Lion is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding COWAY Co and Lion Chemtech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Chemtech and COWAY 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 COWAY Co are associated (or correlated) with Lion Chemtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Chemtech has no effect on the direction of COWAY i.e., COWAY and Lion Chemtech go up and down completely randomly.

Pair Corralation between COWAY and Lion Chemtech

Assuming the 90 days trading horizon COWAY Co is expected to generate 0.79 times more return on investment than Lion Chemtech. However, COWAY Co is 1.26 times less risky than Lion Chemtech. It trades about 0.13 of its potential returns per unit of risk. Lion Chemtech Co is currently generating about 0.0 per unit of risk. If you would invest  6,747,690  in COWAY Co on December 2, 2024 and sell it today you would earn a total of  1,352,310  from holding COWAY Co or generate 20.04% return on investment over 90 days.

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

COWAY Co  vs.  Lion Chemtech Co

COWAY

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COWAY Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, COWAY sustained solid returns over the last few months and may actually be approaching a breakup point.

Lion Chemtech

Risk-Adjusted Performance

Very Weak

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

Pair Trading with COWAY and Lion Chemtech

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

The idea behind COWAY Co and Lion Chemtech 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.