Correlation Between Xilinmen Furniture and Dymatic Chemicals

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

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

Diversification Opportunities for Xilinmen Furniture and Dymatic Chemicals

0.72

Correlation Coefficient

Xilinmen Furniture  Dymatic Chemicals

Poor diversification

The 3 months correlation between Xilinmen and Dymatic is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Xilinmen Furniture Co and Dymatic Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dymatic Chemicals and Xilinmen Furniture 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 Xilinmen Furniture Co are associated (or correlated) with Dymatic Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dymatic Chemicals has no effect on the direction of Xilinmen Furniture i.e., Xilinmen Furniture and Dymatic Chemicals go up and down completely randomly.

Pair Corralation between Xilinmen Furniture and Dymatic Chemicals

Assuming the 90 days trading horizon Xilinmen Furniture Co is expected to generate 0.98 times more return on investment than Dymatic Chemicals. However, Xilinmen Furniture Co is 1.03 times less risky than Dymatic Chemicals. It trades about 0.04 of its potential returns per unit of risk. Dymatic Chemicals is currently generating about 0.02 per unit of risk. If you would invest  1,639  in Xilinmen Furniture Co on December 10, 2024 and sell it today you would earn a total of  19.00  from holding Xilinmen Furniture Co or generate 1.16% return on investment over 90 days.

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

Xilinmen Furniture Co  vs.  Dymatic Chemicals

Xilinmen Furniture

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xilinmen Furniture Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Dymatic Chemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dymatic Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Xilinmen Furniture and Dymatic Chemicals

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

The idea behind Xilinmen Furniture Co and Dymatic Chemicals 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..