Correlation Between Gem-Year Industrial and Liaoning Dingjide

Can any of the company-specific risk be diversified away by investing in both Gem-Year Industrial and Liaoning Dingjide 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 Gem-Year Industrial and Liaoning Dingjide into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gem Year Industrial Co and Liaoning Dingjide Petrochemical, you can compare the effects of market volatilities on Gem-Year Industrial and Liaoning Dingjide 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 Gem-Year Industrial with a short position of Liaoning Dingjide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gem-Year Industrial and Liaoning Dingjide.

Diversification Opportunities for Gem-Year Industrial and Liaoning Dingjide

-0.44

Correlation Coefficient

Gem-Year Industrial  Liaoning Dingjide

Very good diversification

The 3 months correlation between Gem-Year and Liaoning is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Gem Year Industrial Co and Liaoning Dingjide Petrochemica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liaoning Dingjide and Gem-Year Industrial 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 Gem Year Industrial Co are associated (or correlated) with Liaoning Dingjide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liaoning Dingjide has no effect on the direction of Gem-Year Industrial i.e., Gem-Year Industrial and Liaoning Dingjide go up and down completely randomly.

Pair Corralation between Gem-Year Industrial and Liaoning Dingjide

Assuming the 90 days trading horizon Gem Year Industrial Co is expected to generate 0.85 times more return on investment than Liaoning Dingjide. However, Gem Year Industrial Co is 1.18 times less risky than Liaoning Dingjide. It trades about 0.14 of its potential returns per unit of risk. Liaoning Dingjide Petrochemical is currently generating about -0.01 per unit of risk. If you would invest  436.00  in Gem Year Industrial Co on December 23, 2024 and sell it today you would earn a total of  79.00  from holding Gem Year Industrial Co or generate 18.12% return on investment over 90 days.

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

Gem Year Industrial Co  vs.  Liaoning Dingjide Petrochemica

Gem Year Industrial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gem Year Industrial Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gem-Year Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Liaoning Dingjide

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Gem-Year Industrial and Liaoning Dingjide

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

The idea behind Gem Year Industrial Co and Liaoning Dingjide Petrochemical 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.