Correlation Between Liaoning Dingjide and Shenzhen Noposion

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

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

Diversification Opportunities for Liaoning Dingjide and Shenzhen Noposion

0.69

Correlation Coefficient

Liaoning Dingjide  Shenzhen Noposion

Poor diversification

The 3 months correlation between Liaoning and Shenzhen is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Liaoning Dingjide Petrochemica and Shenzhen Noposion Agrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Noposion and Liaoning Dingjide 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 Liaoning Dingjide Petrochemical are associated (or correlated) with Shenzhen Noposion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Noposion has no effect on the direction of Liaoning Dingjide i.e., Liaoning Dingjide and Shenzhen Noposion go up and down completely randomly.

Pair Corralation between Liaoning Dingjide and Shenzhen Noposion

Assuming the 90 days trading horizon Liaoning Dingjide Petrochemical is expected to generate 1.09 times more return on investment than Shenzhen Noposion. However, Liaoning Dingjide is 1.09 times more volatile than Shenzhen Noposion Agrochemicals. It trades about 0.01 of its potential returns per unit of risk. Shenzhen Noposion Agrochemicals is currently generating about -0.11 per unit of risk. If you would invest  3,221  in Liaoning Dingjide Petrochemical on December 26, 2024 and sell it today you would lose (31.00) from holding Liaoning Dingjide Petrochemical or give up 0.96% of portfolio value over 90 days.

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

Liaoning Dingjide Petrochemica  vs.  Shenzhen Noposion Agrochemical

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.

Shenzhen Noposion

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen Noposion Agrochemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Liaoning Dingjide and Shenzhen Noposion

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

The idea behind Liaoning Dingjide Petrochemical and Shenzhen Noposion Agrochemicals 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.