Correlation Between Ducgiang Chemicals and Binhthuan Agriculture

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

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

Diversification Opportunities for Ducgiang Chemicals and Binhthuan Agriculture

0.63

Correlation Coefficient

Ducgiang Chemicals  Binhthuan Agriculture

Poor diversification

The 3 months correlation between Ducgiang and Binhthuan is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ducgiang Chemicals Detergent and Binhthuan Agriculture Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Binhthuan Agriculture and Ducgiang 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 Ducgiang Chemicals Detergent are associated (or correlated) with Binhthuan Agriculture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Binhthuan Agriculture has no effect on the direction of Ducgiang Chemicals i.e., Ducgiang Chemicals and Binhthuan Agriculture go up and down completely randomly.

Pair Corralation between Ducgiang Chemicals and Binhthuan Agriculture

Assuming the 90 days trading horizon Ducgiang Chemicals is expected to generate 2.89 times less return on investment than Binhthuan Agriculture. But when comparing it to its historical volatility, Ducgiang Chemicals Detergent is 2.67 times less risky than Binhthuan Agriculture. It trades about 0.32 of its potential returns per unit of risk. Binhthuan Agriculture Services is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  392,000  in Binhthuan Agriculture Services on September 25, 2024 and sell it today you would earn a total of  111,000  from holding Binhthuan Agriculture Services or generate 28.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Ducgiang Chemicals Detergent  vs.  Binhthuan Agriculture Services

Ducgiang Chemicals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ducgiang Chemicals Detergent are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Ducgiang Chemicals is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Binhthuan Agriculture

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Binhthuan Agriculture Services are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Binhthuan Agriculture displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ducgiang Chemicals and Binhthuan Agriculture

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

The idea behind Ducgiang Chemicals Detergent and Binhthuan Agriculture Services 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.