Correlation Between Liaoning Dingjide and Olympic Circuit

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

Diversification Opportunities for Liaoning Dingjide and Olympic Circuit

0.74

Correlation Coefficient

Liaoning Dingjide  Olympic Circuit

Poor diversification

The 3 months correlation between Liaoning and Olympic is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Liaoning Dingjide Petrochemica and Olympic Circuit Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Circuit Tech 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 Olympic Circuit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olympic Circuit Tech has no effect on the direction of Liaoning Dingjide i.e., Liaoning Dingjide and Olympic Circuit go up and down completely randomly.

Pair Corralation between Liaoning Dingjide and Olympic Circuit

Assuming the 90 days trading horizon Liaoning Dingjide Petrochemical is expected to under-perform the Olympic Circuit. But the stock apears to be less risky and, when comparing its historical volatility, Liaoning Dingjide Petrochemical is 1.15 times less risky than Olympic Circuit. The stock trades about -0.01 of its potential returns per unit of risk. The Olympic Circuit Technology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,467  in Olympic Circuit Technology on October 4, 2024 and sell it today you would earn a total of  1,473  from holding Olympic Circuit Technology or generate 100.41% return on investment over 90 days.

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

Liaoning Dingjide Petrochemica  vs.  Olympic Circuit Technology

Liaoning Dingjide

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Liaoning Dingjide Petrochemical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Liaoning Dingjide may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Olympic Circuit Tech

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Olympic Circuit Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Olympic Circuit may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Liaoning Dingjide and Olympic Circuit

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

The idea behind Liaoning Dingjide Petrochemical and Olympic Circuit Technology 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.