Correlation Between Everdisplay Optronics and Liuzhou Chemical

Can any of the company-specific risk be diversified away by investing in both Everdisplay Optronics and Liuzhou Chemical 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 Everdisplay Optronics and Liuzhou Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Everdisplay Optronics Shanghai and Liuzhou Chemical Industry, you can compare the effects of market volatilities on Everdisplay Optronics and Liuzhou Chemical 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 Everdisplay Optronics with a short position of Liuzhou Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Everdisplay Optronics and Liuzhou Chemical.

Diversification Opportunities for Everdisplay Optronics and Liuzhou Chemical

0.03

Correlation Coefficient

Everdisplay Optronics  Liuzhou Chemical

Significant diversification

The 3 months correlation between Everdisplay and Liuzhou is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Everdisplay Optronics Shanghai and Liuzhou Chemical Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liuzhou Chemical Industry and Everdisplay Optronics 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 Everdisplay Optronics Shanghai are associated (or correlated) with Liuzhou Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liuzhou Chemical Industry has no effect on the direction of Everdisplay Optronics i.e., Everdisplay Optronics and Liuzhou Chemical go up and down completely randomly.

Pair Corralation between Everdisplay Optronics and Liuzhou Chemical

Assuming the 90 days trading horizon Everdisplay Optronics Shanghai is expected to under-perform the Liuzhou Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Everdisplay Optronics Shanghai is 1.9 times less risky than Liuzhou Chemical. The stock trades about -0.04 of its potential returns per unit of risk. The Liuzhou Chemical Industry is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  258.00  in Liuzhou Chemical Industry on October 23, 2024 and sell it today you would earn a total of  127.00  from holding Liuzhou Chemical Industry or generate 49.22% return on investment over 90 days.

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

Everdisplay Optronics Shanghai  vs.  Liuzhou Chemical Industry

Everdisplay Optronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Everdisplay Optronics Shanghai has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Everdisplay Optronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Liuzhou Chemical Industry

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liuzhou Chemical Industry are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Liuzhou Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Everdisplay Optronics and Liuzhou Chemical

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

The idea behind Everdisplay Optronics Shanghai and Liuzhou Chemical Industry 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.