Correlation Between Nafoods Group and Ducgiang Chemicals

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

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

Diversification Opportunities for Nafoods Group and Ducgiang Chemicals

0.3

Correlation Coefficient

Nafoods Group  Ducgiang Chemicals

Weak diversification

The 3 months correlation between Nafoods and Ducgiang is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Nafoods Group 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 Nafoods Group 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 Nafoods Group 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 Nafoods Group i.e., Nafoods Group and Ducgiang Chemicals go up and down completely randomly.

Pair Corralation between Nafoods Group and Ducgiang Chemicals

Assuming the 90 days trading horizon Nafoods Group JSC is expected to under-perform the Ducgiang Chemicals. In addition to that, Nafoods Group is 1.8 times more volatile than Ducgiang Chemicals Detergent. It trades about -0.04 of its total potential returns per unit of risk. Ducgiang Chemicals Detergent is currently generating about -0.02 per unit of volatility. If you would invest  11,214,200  in Ducgiang Chemicals Detergent on September 4, 2024 and sell it today you would lose (234,200) from holding Ducgiang Chemicals Detergent or give up 2.09% of portfolio value over 90 days.

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

Nafoods Group JSC  vs.  Ducgiang Chemicals Detergent

Nafoods Group JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nafoods Group JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Nafoods Group is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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 Nafoods Group and Ducgiang Chemicals

The main advantage of trading using opposite Nafoods Group and Ducgiang Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nafoods Group 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 Nafoods Group 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.

Check out your portfolio center.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.