Correlation Between Aba Chemicals and Shandong Ruifeng

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

By analyzing existing cross correlation between Aba Chemicals Corp and Shandong Ruifeng Chemical, you can compare the effects of market volatilities on Aba Chemicals and Shandong Ruifeng 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 Aba Chemicals with a short position of Shandong Ruifeng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aba Chemicals and Shandong Ruifeng.

Diversification Opportunities for Aba Chemicals and Shandong Ruifeng

0.41

Correlation Coefficient

Aba Chemicals  Shandong Ruifeng

Very weak diversification

The 3 months correlation between Aba and Shandong is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Aba Chemicals Corp and Shandong Ruifeng Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Ruifeng Chemical and Aba Chemicals 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 Aba Chemicals Corp are associated (or correlated) with Shandong Ruifeng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Ruifeng Chemical has no effect on the direction of Aba Chemicals i.e., Aba Chemicals and Shandong Ruifeng go up and down completely randomly.

Pair Corralation between Aba Chemicals and Shandong Ruifeng

Assuming the 90 days trading horizon Aba Chemicals Corp is expected to under-perform the Shandong Ruifeng. But the stock apears to be less risky and, when comparing its historical volatility, Aba Chemicals Corp is 1.08 times less risky than Shandong Ruifeng. The stock trades about -0.17 of its potential returns per unit of risk. The Shandong Ruifeng Chemical is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,108  in Shandong Ruifeng Chemical on December 1, 2024 and sell it today you would lose (56.00) from holding Shandong Ruifeng Chemical or give up 5.05% of portfolio value over 90 days.

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

Aba Chemicals Corp  vs.  Shandong Ruifeng Chemical

Aba Chemicals Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aba Chemicals Corp 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Shandong Ruifeng Chemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shandong Ruifeng Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shandong Ruifeng is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aba Chemicals and Shandong Ruifeng

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

The idea behind Aba Chemicals Corp and Shandong Ruifeng 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.