Correlation Between Lion Chemtech and Hannong Chemicals

Can any of the company-specific risk be diversified away by investing in both Lion Chemtech and Hannong 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 Lion Chemtech and Hannong Chemicals 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 Hannong Chemicals, you can compare the effects of market volatilities on Lion Chemtech and Hannong 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 Lion Chemtech with a short position of Hannong Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion Chemtech and Hannong Chemicals.

Diversification Opportunities for Lion Chemtech and Hannong Chemicals

-0.65

Correlation Coefficient

Lion Chemtech  Hannong Chemicals

Excellent diversification

The 3 months correlation between Lion and Hannong is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Lion Chemtech Co and Hannong Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannong Chemicals 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 Hannong Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hannong Chemicals has no effect on the direction of Lion Chemtech i.e., Lion Chemtech and Hannong Chemicals go up and down completely randomly.

Pair Corralation between Lion Chemtech and Hannong Chemicals

Assuming the 90 days trading horizon Lion Chemtech Co is expected to under-perform the Hannong Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, Lion Chemtech Co is 2.04 times less risky than Hannong Chemicals. The stock trades about -0.04 of its potential returns per unit of risk. The Hannong Chemicals is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,686,847  in Hannong Chemicals on September 13, 2024 and sell it today you would lose (278,847) from holding Hannong Chemicals or give up 16.53% of portfolio value over 90 days.

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

Lion Chemtech Co  vs.  Hannong Chemicals

Lion Chemtech

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lion Chemtech Co are ranked lower than 6 (%) 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.

Hannong Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hannong Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Lion Chemtech and Hannong Chemicals

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

The idea behind Lion Chemtech Co and Hannong 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.