Correlation Between Ducgiang Chemicals and Elcom Technology

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

Diversification Opportunities for Ducgiang Chemicals and Elcom Technology

0.69

Correlation Coefficient

Ducgiang Chemicals  Elcom Technology

Poor diversification

The 3 months correlation between Ducgiang and Elcom is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ducgiang Chemicals Detergent and Elcom Technology Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elcom Technology Com 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 Elcom Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elcom Technology Com has no effect on the direction of Ducgiang Chemicals i.e., Ducgiang Chemicals and Elcom Technology go up and down completely randomly.

Pair Corralation between Ducgiang Chemicals and Elcom Technology

Assuming the 90 days trading horizon Ducgiang Chemicals Detergent is expected to generate 0.91 times more return on investment than Elcom Technology. However, Ducgiang Chemicals Detergent is 1.09 times less risky than Elcom Technology. It trades about 0.21 of its potential returns per unit of risk. Elcom Technology Communications is currently generating about 0.02 per unit of risk. If you would invest  10,990,000  in Ducgiang Chemicals Detergent on October 4, 2024 and sell it today you would earn a total of  670,000  from holding Ducgiang Chemicals Detergent or generate 6.1% return on investment over 90 days.

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

Ducgiang Chemicals Detergent  vs.  Elcom Technology Communication

Ducgiang Chemicals

Risk-Adjusted Performance

5 of 100

Insignificant

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.

Elcom Technology Com

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Ducgiang Chemicals and Elcom Technology

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

The idea behind Ducgiang Chemicals Detergent and Elcom Technology Communications 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.