Correlation Between Hubei Dinglong and Daoming OpticsChemical

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

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

Diversification Opportunities for Hubei Dinglong and Daoming OpticsChemical

0.81

Correlation Coefficient

Hubei Dinglong  Daoming OpticsChemical

Very poor diversification

The 3 months correlation between Hubei and Daoming is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Dinglong Chemical and Daoming OpticsChemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daoming OpticsChemical and Hubei Dinglong 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 Hubei Dinglong Chemical are associated (or correlated) with Daoming OpticsChemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daoming OpticsChemical has no effect on the direction of Hubei Dinglong i.e., Hubei Dinglong and Daoming OpticsChemical go up and down completely randomly.

Pair Corralation between Hubei Dinglong and Daoming OpticsChemical

Assuming the 90 days trading horizon Hubei Dinglong Chemical is not expected to generate positive returns. However, Hubei Dinglong Chemical is 1.56 times less risky than Daoming OpticsChemical. It waists most of its returns potential to compensate for thr risk taken. Daoming OpticsChemical is generating about 0.24 per unit of risk. If you would invest  858.00  in Daoming OpticsChemical Co on September 22, 2024 and sell it today you would earn a total of  142.00  from holding Daoming OpticsChemical Co or generate 16.55% return on investment over 90 days.

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

Hubei Dinglong Chemical  vs.  Daoming OpticsChemical Co

Hubei Dinglong Chemical

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hubei Dinglong Chemical are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hubei Dinglong sustained solid returns over the last few months and may actually be approaching a breakup point.

Daoming OpticsChemical

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Daoming OpticsChemical Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daoming OpticsChemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hubei Dinglong and Daoming OpticsChemical

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

The idea behind Hubei Dinglong Chemical and Daoming OpticsChemical 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.

Check out your portfolio center.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.