Correlation Between Shanghai Friendess and Dymatic Chemicals

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

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

Diversification Opportunities for Shanghai Friendess and Dymatic Chemicals

-0.34

Correlation Coefficient

Shanghai Friendess  Dymatic Chemicals

Very good diversification

The 3 months correlation between Shanghai and Dymatic is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Friendess Electronics and Dymatic Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dymatic Chemicals and Shanghai Friendess 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 Shanghai Friendess Electronics 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 Shanghai Friendess i.e., Shanghai Friendess and Dymatic Chemicals go up and down completely randomly.

Pair Corralation between Shanghai Friendess and Dymatic Chemicals

Assuming the 90 days trading horizon Shanghai Friendess Electronics is expected to generate 1.25 times more return on investment than Dymatic Chemicals. However, Shanghai Friendess is 1.25 times more volatile than Dymatic Chemicals. It trades about 0.01 of its potential returns per unit of risk. Dymatic Chemicals is currently generating about -0.01 per unit of risk. If you would invest  19,502  in Shanghai Friendess Electronics on October 4, 2024 and sell it today you would lose (77.00) from holding Shanghai Friendess Electronics or give up 0.39% of portfolio value over 90 days.

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

Shanghai Friendess Electronics  vs.  Dymatic Chemicals

Shanghai Friendess

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai Friendess Electronics 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Dymatic Chemicals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dymatic Chemicals are ranked lower than 2 (%) 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 February 2025.

Pair Trading with Shanghai Friendess and Dymatic Chemicals

The main advantage of trading using opposite Shanghai Friendess and Dymatic Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanghai Friendess 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 Shanghai Friendess Electronics 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.