Correlation Between Liuzhou Chemical and Dezhan HealthCare

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Can any of the company-specific risk be diversified away by investing in both Liuzhou Chemical and Dezhan HealthCare 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 Liuzhou Chemical and Dezhan HealthCare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Liuzhou Chemical Industry and Dezhan HealthCare Co, you can compare the effects of market volatilities on Liuzhou Chemical and Dezhan HealthCare 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 Liuzhou Chemical with a short position of Dezhan HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liuzhou Chemical and Dezhan HealthCare.

Diversification Opportunities for Liuzhou Chemical and Dezhan HealthCare

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Liuzhou and Dezhan is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Liuzhou Chemical Industry and Dezhan HealthCare Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dezhan HealthCare and Liuzhou 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 Liuzhou Chemical Industry are associated (or correlated) with Dezhan HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dezhan HealthCare has no effect on the direction of Liuzhou Chemical i.e., Liuzhou Chemical and Dezhan HealthCare go up and down completely randomly.

Pair Corralation between Liuzhou Chemical and Dezhan HealthCare

Assuming the 90 days trading horizon Liuzhou Chemical Industry is expected to generate 0.97 times more return on investment than Dezhan HealthCare. However, Liuzhou Chemical Industry is 1.03 times less risky than Dezhan HealthCare. It trades about 0.0 of its potential returns per unit of risk. Dezhan HealthCare Co is currently generating about -0.01 per unit of risk. If you would invest  313.00  in Liuzhou Chemical Industry on October 6, 2024 and sell it today you would lose (36.00) from holding Liuzhou Chemical Industry or give up 11.5% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Liuzhou Chemical Industry  vs.  Dezhan HealthCare Co

 Performance 
       Timeline  
Liuzhou Chemical Industry 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

0 of 100

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

Liuzhou Chemical and Dezhan HealthCare Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Liuzhou Chemical and Dezhan HealthCare

The main advantage of trading using opposite Liuzhou Chemical and Dezhan HealthCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liuzhou Chemical position performs unexpectedly, Dezhan HealthCare 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 Dezhan HealthCare will offset losses from the drop in Dezhan HealthCare's long position.
The idea behind Liuzhou Chemical Industry and Dezhan HealthCare 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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