Correlation Between Daxin Materials and Ruentex Materials

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

By analyzing existing cross correlation between Daxin Materials Corp and Ruentex Materials Co, you can compare the effects of market volatilities on Daxin Materials and Ruentex Materials 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 Daxin Materials with a short position of Ruentex Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daxin Materials and Ruentex Materials.

Diversification Opportunities for Daxin Materials and Ruentex Materials

-0.19

Correlation Coefficient

Daxin Materials  Ruentex Materials

Good diversification

The 3 months correlation between Daxin and Ruentex is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Daxin Materials Corp and Ruentex Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ruentex Materials and Daxin Materials 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 Daxin Materials Corp are associated (or correlated) with Ruentex Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ruentex Materials has no effect on the direction of Daxin Materials i.e., Daxin Materials and Ruentex Materials go up and down completely randomly.

Pair Corralation between Daxin Materials and Ruentex Materials

Assuming the 90 days trading horizon Daxin Materials Corp is expected to generate 2.82 times more return on investment than Ruentex Materials. However, Daxin Materials is 2.82 times more volatile than Ruentex Materials Co. It trades about 0.03 of its potential returns per unit of risk. Ruentex Materials Co is currently generating about 0.01 per unit of risk. If you would invest  18,500  in Daxin Materials Corp on December 28, 2024 and sell it today you would earn a total of  400.00  from holding Daxin Materials Corp or generate 2.16% return on investment over 90 days.

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

Daxin Materials Corp  vs.  Ruentex Materials Co

Daxin Materials Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Daxin Materials Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Daxin Materials is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Ruentex Materials

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ruentex Materials Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Ruentex Materials 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 Daxin Materials and Ruentex Materials

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

The idea behind Daxin Materials Corp and Ruentex Materials 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.

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..