Correlation Between Ducgiang Chemicals and Southern Rubber

Can any of the company-specific risk be diversified away by investing in both Ducgiang Chemicals and Southern Rubber 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 Southern Rubber 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 Southern Rubber Industry, you can compare the effects of market volatilities on Ducgiang Chemicals and Southern Rubber 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 Southern Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ducgiang Chemicals and Southern Rubber.

Diversification Opportunities for Ducgiang Chemicals and Southern Rubber

0.47

Correlation Coefficient

Ducgiang Chemicals  Southern Rubber

Very weak diversification

The 3 months correlation between Ducgiang and Southern is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Ducgiang Chemicals Detergent and Southern Rubber Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Rubber Industry 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 Southern Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Rubber Industry has no effect on the direction of Ducgiang Chemicals i.e., Ducgiang Chemicals and Southern Rubber go up and down completely randomly.

Pair Corralation between Ducgiang Chemicals and Southern Rubber

Assuming the 90 days trading horizon Ducgiang Chemicals Detergent is expected to generate 1.0 times more return on investment than Southern Rubber. However, Ducgiang Chemicals is 1.0 times more volatile than Southern Rubber Industry. It trades about 0.08 of its potential returns per unit of risk. Southern Rubber Industry is currently generating about 0.02 per unit of risk. If you would invest  5,178,493  in Ducgiang Chemicals Detergent on October 24, 2024 and sell it today you would earn a total of  5,721,507  from holding Ducgiang Chemicals Detergent or generate 110.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.79%
Values	Daily Returns

Ducgiang Chemicals Detergent  vs.  Southern Rubber Industry

Ducgiang Chemicals

Risk-Adjusted Performance

0 of 100

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 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.

Southern Rubber Industry

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Rubber Industry are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Southern Rubber displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ducgiang Chemicals and Southern Rubber

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

The idea behind Ducgiang Chemicals Detergent and Southern Rubber 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.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.