Correlation Between Evermore Chemical and Hsinli Chemical

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

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

Diversification Opportunities for Evermore Chemical and Hsinli Chemical

-0.06

Correlation Coefficient

Evermore Chemical  Hsinli Chemical

Good diversification

The 3 months correlation between Evermore and Hsinli is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Evermore Chemical Industry and Hsinli Chemical Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hsinli Chemical Indu and Evermore 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 Evermore Chemical Industry are associated (or correlated) with Hsinli Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hsinli Chemical Indu has no effect on the direction of Evermore Chemical i.e., Evermore Chemical and Hsinli Chemical go up and down completely randomly.

Pair Corralation between Evermore Chemical and Hsinli Chemical

Assuming the 90 days trading horizon Evermore Chemical Industry is expected to under-perform the Hsinli Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Evermore Chemical Industry is 2.05 times less risky than Hsinli Chemical. The stock trades about -0.06 of its potential returns per unit of risk. The Hsinli Chemical Industrial is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  4,905  in Hsinli Chemical Industrial on December 23, 2024 and sell it today you would earn a total of  4,195  from holding Hsinli Chemical Industrial or generate 85.52% return on investment over 90 days.

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

Evermore Chemical Industry  vs.  Hsinli Chemical Industrial

Evermore Chemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evermore Chemical Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Evermore Chemical is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Hsinli Chemical Indu

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Hsinli Chemical Industrial are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hsinli Chemical showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evermore Chemical and Hsinli Chemical

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

The idea behind Evermore Chemical Industry and Hsinli Chemical Industrial 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.