Correlation Between Dongnam Chemical and BIT Computer

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

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

Diversification Opportunities for Dongnam Chemical and BIT Computer

-0.16

Correlation Coefficient

Dongnam Chemical  BIT Computer

Good diversification

The 3 months correlation between Dongnam and BIT is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Dongnam Chemical Co and BIT Computer Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BIT Computer and Dongnam 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 Dongnam Chemical Co are associated (or correlated) with BIT Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BIT Computer has no effect on the direction of Dongnam Chemical i.e., Dongnam Chemical and BIT Computer go up and down completely randomly.

Pair Corralation between Dongnam Chemical and BIT Computer

Assuming the 90 days trading horizon Dongnam Chemical Co is expected to generate 0.96 times more return on investment than BIT Computer. However, Dongnam Chemical Co is 1.04 times less risky than BIT Computer. It trades about 0.12 of its potential returns per unit of risk. BIT Computer Co is currently generating about -0.06 per unit of risk. If you would invest  3,145,000  in Dongnam Chemical Co on December 23, 2024 and sell it today you would earn a total of  265,000  from holding Dongnam Chemical Co or generate 8.43% return on investment over 90 days.

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

Dongnam Chemical Co  vs.  BIT Computer Co

Dongnam Chemical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dongnam Chemical Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongnam Chemical may actually be approaching a critical reversion point that can send shares even higher in April 2025.

BIT Computer

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Dongnam Chemical and BIT Computer

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

The idea behind Dongnam Chemical Co and BIT Computer 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.