Correlation Between Liuzhou Chemical and Dosilicon

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

Diversification Opportunities for Liuzhou Chemical and Dosilicon

0.26

Correlation Coefficient

Liuzhou Chemical  Dosilicon

Modest diversification

The 3 months correlation between Liuzhou and Dosilicon is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Liuzhou Chemical Industry and Dosilicon Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dosilicon 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 Dosilicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dosilicon has no effect on the direction of Liuzhou Chemical i.e., Liuzhou Chemical and Dosilicon go up and down completely randomly.

Pair Corralation between Liuzhou Chemical and Dosilicon

Assuming the 90 days trading horizon Liuzhou Chemical Industry is expected to generate 1.23 times more return on investment than Dosilicon. However, Liuzhou Chemical is 1.23 times more volatile than Dosilicon Co. It trades about 0.11 of its potential returns per unit of risk. Dosilicon Co is currently generating about 0.08 per unit of risk. If you would invest  283.00  in Liuzhou Chemical Industry on December 26, 2024 and sell it today you would earn a total of  67.00  from holding Liuzhou Chemical Industry or generate 23.67% return on investment over 90 days.

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

Liuzhou Chemical Industry  vs.  Dosilicon Co

Liuzhou Chemical Industry

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Liuzhou Chemical Industry are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Liuzhou Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Dosilicon

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dosilicon Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dosilicon sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Liuzhou Chemical and Dosilicon

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

The idea behind Liuzhou Chemical Industry and Dosilicon 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.