Correlation Between Lion Chemtech and PJ Electronics

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

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

Diversification Opportunities for Lion Chemtech and PJ Electronics

-0.53

Correlation Coefficient

Lion Chemtech  PJ Electronics

Excellent diversification

The 3 months correlation between Lion and 006140 is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Lion Chemtech Co and PJ Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PJ Electronics and Lion Chemtech 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 Lion Chemtech Co are associated (or correlated) with PJ Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PJ Electronics has no effect on the direction of Lion Chemtech i.e., Lion Chemtech and PJ Electronics go up and down completely randomly.

Pair Corralation between Lion Chemtech and PJ Electronics

Assuming the 90 days trading horizon Lion Chemtech Co is expected to under-perform the PJ Electronics. In addition to that, Lion Chemtech is 1.18 times more volatile than PJ Electronics Co. It trades about -0.04 of its total potential returns per unit of risk. PJ Electronics Co is currently generating about -0.04 per unit of volatility. If you would invest  640,703  in PJ Electronics Co on October 9, 2024 and sell it today you would lose (156,703) from holding PJ Electronics Co or give up 24.46% of portfolio value over 90 days.

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

Lion Chemtech Co  vs.  PJ Electronics Co

Lion Chemtech

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lion Chemtech Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lion Chemtech sustained solid returns over the last few months and may actually be approaching a breakup point.

PJ Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PJ Electronics Co 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 Lion Chemtech and PJ Electronics

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

The idea behind Lion Chemtech Co and PJ Electronics 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.