Correlation Between Allgens Medical and Longxing Chemical

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

By analyzing existing cross correlation between Allgens Medical Technology and Longxing Chemical Stock, you can compare the effects of market volatilities on Allgens Medical and Longxing 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 Allgens Medical with a short position of Longxing Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allgens Medical and Longxing Chemical.

Diversification Opportunities for Allgens Medical and Longxing Chemical

0.7

Correlation Coefficient

Allgens Medical  Longxing Chemical

Poor diversification

The 3 months correlation between Allgens and Longxing is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Allgens Medical Technology and Longxing Chemical Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longxing Chemical Stock and Allgens Medical 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 Allgens Medical Technology are associated (or correlated) with Longxing Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longxing Chemical Stock has no effect on the direction of Allgens Medical i.e., Allgens Medical and Longxing Chemical go up and down completely randomly.

Pair Corralation between Allgens Medical and Longxing Chemical

Assuming the 90 days trading horizon Allgens Medical Technology is expected to under-perform the Longxing Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Allgens Medical Technology is 1.24 times less risky than Longxing Chemical. The stock trades about -0.04 of its potential returns per unit of risk. The Longxing Chemical Stock is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  567.00  in Longxing Chemical Stock on October 10, 2024 and sell it today you would lose (16.00) from holding Longxing Chemical Stock or give up 2.82% of portfolio value over 90 days.

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

Allgens Medical Technology  vs.  Longxing Chemical Stock

Allgens Medical Tech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Allgens Medical Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Allgens Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Longxing Chemical Stock

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Longxing Chemical Stock are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Longxing Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allgens Medical and Longxing Chemical

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

The idea behind Allgens Medical Technology and Longxing Chemical Stock 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.