Correlation Between Ducgiang Chemicals and Cotec Construction

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

Diversification Opportunities for Ducgiang Chemicals and Cotec Construction

0.02

Correlation Coefficient

Ducgiang Chemicals  Cotec Construction

Significant diversification

The 3 months correlation between Ducgiang and Cotec is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Ducgiang Chemicals Detergent and Cotec Construction JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cotec Construction JSC 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 Cotec Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cotec Construction JSC has no effect on the direction of Ducgiang Chemicals i.e., Ducgiang Chemicals and Cotec Construction go up and down completely randomly.

Pair Corralation between Ducgiang Chemicals and Cotec Construction

Assuming the 90 days trading horizon Ducgiang Chemicals Detergent is expected to under-perform the Cotec Construction. But the stock apears to be less risky and, when comparing its historical volatility, Ducgiang Chemicals Detergent is 1.25 times less risky than Cotec Construction. The stock trades about -0.27 of its potential returns per unit of risk. The Cotec Construction JSC is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  6,900,000  in Cotec Construction JSC on October 27, 2024 and sell it today you would earn a total of  430,000  from holding Cotec Construction JSC or generate 6.23% return on investment over 90 days.

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

Ducgiang Chemicals Detergent  vs.  Cotec Construction JSC

Ducgiang Chemicals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ducgiang Chemicals Detergent are ranked lower than 1 (%) 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.

Cotec Construction JSC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cotec Construction JSC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Cotec Construction may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ducgiang Chemicals and Cotec Construction

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

The idea behind Ducgiang Chemicals Detergent and Cotec Construction JSC 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.