Correlation Between Shiny Chemical and Double Bond

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

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

Diversification Opportunities for Shiny Chemical and Double Bond

0.59

Correlation Coefficient

Shiny Chemical  Double Bond

Very weak diversification

The 3 months correlation between Shiny and Double is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Shiny Chemical Industrial and Double Bond Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Double Bond Chemical and Shiny 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 Shiny Chemical Industrial are associated (or correlated) with Double Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Double Bond Chemical has no effect on the direction of Shiny Chemical i.e., Shiny Chemical and Double Bond go up and down completely randomly.

Pair Corralation between Shiny Chemical and Double Bond

Assuming the 90 days trading horizon Shiny Chemical Industrial is expected to under-perform the Double Bond. In addition to that, Shiny Chemical is 1.78 times more volatile than Double Bond Chemical. It trades about -0.22 of its total potential returns per unit of risk. Double Bond Chemical is currently generating about -0.02 per unit of volatility. If you would invest  4,500  in Double Bond Chemical on October 8, 2024 and sell it today you would lose (20.00) from holding Double Bond Chemical or give up 0.44% of portfolio value over 90 days.

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

Shiny Chemical Industrial  vs.  Double Bond Chemical

Shiny Chemical Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shiny Chemical Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Double Bond Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Shiny Chemical and Double Bond

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

The idea behind Shiny Chemical Industrial and Double Bond Chemical 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.