Correlation Between Mengtian Home and Dymatic Chemicals

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

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

Diversification Opportunities for Mengtian Home and Dymatic Chemicals

0.78

Correlation Coefficient

Mengtian Home  Dymatic Chemicals

Poor diversification

The 3 months correlation between Mengtian and Dymatic is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Mengtian Home Group and Dymatic Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dymatic Chemicals and Mengtian Home 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 Mengtian Home Group 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 Mengtian Home i.e., Mengtian Home and Dymatic Chemicals go up and down completely randomly.

Pair Corralation between Mengtian Home and Dymatic Chemicals

Assuming the 90 days trading horizon Mengtian Home is expected to generate 1.28 times less return on investment than Dymatic Chemicals. In addition to that, Mengtian Home is 1.23 times more volatile than Dymatic Chemicals. It trades about 0.07 of its total potential returns per unit of risk. Dymatic Chemicals is currently generating about 0.11 per unit of volatility. If you would invest  603.00  in Dymatic Chemicals on December 27, 2024 and sell it today you would earn a total of  56.00  from holding Dymatic Chemicals or generate 9.29% return on investment over 90 days.

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

Mengtian Home Group  vs.  Dymatic Chemicals

Mengtian Home Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mengtian Home Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mengtian Home may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Dymatic Chemicals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dymatic Chemicals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dymatic Chemicals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Mengtian Home and Dymatic Chemicals

The main advantage of trading using opposite Mengtian Home and Dymatic Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mengtian Home 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 Mengtian Home Group 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.