Correlation Between Bao Ngoc and Ducgiang Chemicals

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

By analyzing existing cross correlation between Bao Ngoc Investment and Ducgiang Chemicals Detergent, you can compare the effects of market volatilities on Bao Ngoc and Ducgiang 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 Bao Ngoc with a short position of Ducgiang Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bao Ngoc and Ducgiang Chemicals.

Diversification Opportunities for Bao Ngoc and Ducgiang Chemicals

0.77

Correlation Coefficient

Bao Ngoc  Ducgiang Chemicals

Poor diversification

The 3 months correlation between Bao and Ducgiang is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Bao Ngoc Investment and Ducgiang Chemicals Detergent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ducgiang Chemicals and Bao Ngoc 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 Bao Ngoc Investment are associated (or correlated) with Ducgiang Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ducgiang Chemicals has no effect on the direction of Bao Ngoc i.e., Bao Ngoc and Ducgiang Chemicals go up and down completely randomly.

Pair Corralation between Bao Ngoc and Ducgiang Chemicals

Assuming the 90 days trading horizon Bao Ngoc Investment is expected to under-perform the Ducgiang Chemicals. In addition to that, Bao Ngoc is 1.59 times more volatile than Ducgiang Chemicals Detergent. It trades about -0.13 of its total potential returns per unit of risk. Ducgiang Chemicals Detergent is currently generating about -0.19 per unit of volatility. If you would invest  11,610,000  in Ducgiang Chemicals Detergent on December 29, 2024 and sell it today you would lose (1,320,000) from holding Ducgiang Chemicals Detergent or give up 11.37% of portfolio value over 90 days.

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

Bao Ngoc Investment  vs.  Ducgiang Chemicals Detergent

Bao Ngoc Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bao Ngoc Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Ducgiang Chemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ducgiang Chemicals Detergent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Bao Ngoc and Ducgiang Chemicals

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

The idea behind Bao Ngoc Investment and Ducgiang Chemicals Detergent 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.