Correlation Between Aba Chemicals and Datang HuaYin

Can any of the company-specific risk be diversified away by investing in both Aba Chemicals and Datang HuaYin 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 Datang HuaYin 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 Datang HuaYin Electric, you can compare the effects of market volatilities on Aba Chemicals and Datang HuaYin 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 Datang HuaYin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aba Chemicals and Datang HuaYin.

Diversification Opportunities for Aba Chemicals and Datang HuaYin

0.93

Correlation Coefficient

Aba Chemicals  Datang HuaYin

Almost no diversification

The 3 months correlation between Aba and Datang is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Aba Chemicals Corp and Datang HuaYin Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datang HuaYin Electric 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 Datang HuaYin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datang HuaYin Electric has no effect on the direction of Aba Chemicals i.e., Aba Chemicals and Datang HuaYin go up and down completely randomly.

Pair Corralation between Aba Chemicals and Datang HuaYin

Assuming the 90 days trading horizon Aba Chemicals Corp is expected to generate 1.81 times more return on investment than Datang HuaYin. However, Aba Chemicals is 1.81 times more volatile than Datang HuaYin Electric. It trades about 0.03 of its potential returns per unit of risk. Datang HuaYin Electric is currently generating about 0.01 per unit of risk. If you would invest  711.00  in Aba Chemicals Corp on December 25, 2024 and sell it today you would earn a total of  22.00  from holding Aba Chemicals Corp or generate 3.09% return on investment over 90 days.

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

Aba Chemicals Corp  vs.  Datang HuaYin Electric

Aba Chemicals Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aba Chemicals Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Aba Chemicals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Datang HuaYin Electric

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Datang HuaYin Electric are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Datang HuaYin 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 Datang HuaYin

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

The idea behind Aba Chemicals Corp and Datang HuaYin Electric 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.