Correlation Between Liuzhou Chemical and Digiwin Software

Can any of the company-specific risk be diversified away by investing in both Liuzhou Chemical and Digiwin Software 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 Digiwin Software 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 Digiwin Software Co, you can compare the effects of market volatilities on Liuzhou Chemical and Digiwin Software 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 Digiwin Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liuzhou Chemical and Digiwin Software.

Diversification Opportunities for Liuzhou Chemical and Digiwin Software

0.88

Correlation Coefficient

Liuzhou Chemical  Digiwin Software

Very poor diversification

The 3 months correlation between Liuzhou and Digiwin is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Liuzhou Chemical Industry and Digiwin Software Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digiwin Software 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 Digiwin Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digiwin Software has no effect on the direction of Liuzhou Chemical i.e., Liuzhou Chemical and Digiwin Software go up and down completely randomly.

Pair Corralation between Liuzhou Chemical and Digiwin Software

Assuming the 90 days trading horizon Liuzhou Chemical is expected to generate 24.16 times less return on investment than Digiwin Software. But when comparing it to its historical volatility, Liuzhou Chemical Industry is 1.63 times less risky than Digiwin Software. It trades about 0.0 of its potential returns per unit of risk. Digiwin Software Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,597  in Digiwin Software Co on October 4, 2024 and sell it today you would earn a total of  990.00  from holding Digiwin Software Co or generate 61.99% return on investment over 90 days.

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

Liuzhou Chemical Industry  vs.  Digiwin Software Co

Liuzhou Chemical Industry

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Liuzhou Chemical Industry are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Liuzhou Chemical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Digiwin Software

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Liuzhou Chemical and Digiwin Software

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

The idea behind Liuzhou Chemical Industry and Digiwin Software 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.