Correlation Between MST Investment and Ducgiang Chemicals

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

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

Diversification Opportunities for MST Investment and Ducgiang Chemicals

0.63

Correlation Coefficient

MST Investment  Ducgiang Chemicals

Poor diversification

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

Pair Corralation between MST Investment and Ducgiang Chemicals

Assuming the 90 days trading horizon MST Investment is expected to generate 1.14 times less return on investment than Ducgiang Chemicals. In addition to that, MST Investment is 1.45 times more volatile than Ducgiang Chemicals Detergent. It trades about 0.05 of its total potential returns per unit of risk. Ducgiang Chemicals Detergent is currently generating about 0.09 per unit of volatility. If you would invest  5,169,728  in Ducgiang Chemicals Detergent on October 11, 2024 and sell it today you would earn a total of  6,070,272  from holding Ducgiang Chemicals Detergent or generate 117.42% return on investment over 90 days.

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

MST Investment JSC  vs.  Ducgiang Chemicals Detergent

MST Investment JSC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MST Investment JSC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, MST Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with MST Investment and Ducgiang Chemicals

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

The idea behind MST Investment JSC and Ducgiang Chemicals Detergent 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.