Correlation Between Ducgiang Chemicals and Sao Ta

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

Diversification Opportunities for Ducgiang Chemicals and Sao Ta

0.22

Correlation Coefficient

Ducgiang Chemicals  Sao Ta

Modest diversification

The 3 months correlation between Ducgiang and Sao is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ducgiang Chemicals Detergent and Sao Ta Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sao Ta Foods 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 Sao Ta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sao Ta Foods has no effect on the direction of Ducgiang Chemicals i.e., Ducgiang Chemicals and Sao Ta go up and down completely randomly.

Pair Corralation between Ducgiang Chemicals and Sao Ta

Assuming the 90 days trading horizon Ducgiang Chemicals Detergent is expected to generate 1.94 times more return on investment than Sao Ta. However, Ducgiang Chemicals is 1.94 times more volatile than Sao Ta Foods. It trades about 0.0 of its potential returns per unit of risk. Sao Ta Foods is currently generating about -0.07 per unit of risk. If you would invest  11,827,400  in Ducgiang Chemicals Detergent on September 15, 2024 and sell it today you would lose (337,400) from holding Ducgiang Chemicals Detergent or give up 2.85% of portfolio value over 90 days.

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

Ducgiang Chemicals Detergent  vs.  Sao Ta Foods

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.

Sao Ta Foods

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sao Ta Foods are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Sao Ta is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ducgiang Chemicals and Sao Ta

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

The idea behind Ducgiang Chemicals Detergent and Sao Ta Foods 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.