Correlation Between Chembond Chemicals and Chemcon Speciality

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

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

Diversification Opportunities for Chembond Chemicals and Chemcon Speciality

0.09

Correlation Coefficient

Chembond Chemicals  Chemcon Speciality

Significant diversification

The 3 months correlation between Chembond and Chemcon is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Chembond Chemicals and Chemcon Speciality Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemcon Speciality and Chembond Chemicals 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 Chembond Chemicals are associated (or correlated) with Chemcon Speciality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemcon Speciality has no effect on the direction of Chembond Chemicals i.e., Chembond Chemicals and Chemcon Speciality go up and down completely randomly.

Pair Corralation between Chembond Chemicals and Chemcon Speciality

Assuming the 90 days trading horizon Chembond Chemicals is expected to generate 1.44 times more return on investment than Chemcon Speciality. However, Chembond Chemicals is 1.44 times more volatile than Chemcon Speciality Chemicals. It trades about 0.07 of its potential returns per unit of risk. Chemcon Speciality Chemicals is currently generating about -0.22 per unit of risk. If you would invest  57,710  in Chembond Chemicals on October 12, 2024 and sell it today you would earn a total of  1,575  from holding Chembond Chemicals or generate 2.73% return on investment over 90 days.

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

Chembond Chemicals  vs.  Chemcon Speciality Chemicals

Chembond Chemicals

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Chembond Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Chembond Chemicals is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Chemcon Speciality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chemcon Speciality Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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 Chembond Chemicals and Chemcon Speciality

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

The idea behind Chembond Chemicals and Chemcon Speciality 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.