Correlation Between Daoming OpticsChemical and Rongsheng Petrochemical
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By analyzing existing cross correlation between Daoming OpticsChemical Co and Rongsheng Petrochemical Co, you can compare the effects of market volatilities on Daoming OpticsChemical and Rongsheng Petrochemical 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 Daoming OpticsChemical with a short position of Rongsheng Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daoming OpticsChemical and Rongsheng Petrochemical.
Diversification Opportunities for Daoming OpticsChemical and Rongsheng Petrochemical
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Daoming and Rongsheng is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Daoming OpticsChemical Co and Rongsheng Petrochemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rongsheng Petrochemical and Daoming OpticsChemical 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 Daoming OpticsChemical Co are associated (or correlated) with Rongsheng Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rongsheng Petrochemical has no effect on the direction of Daoming OpticsChemical i.e., Daoming OpticsChemical and Rongsheng Petrochemical go up and down completely randomly.
Pair Corralation between Daoming OpticsChemical and Rongsheng Petrochemical
Assuming the 90 days trading horizon Daoming OpticsChemical Co is expected to generate 1.84 times more return on investment than Rongsheng Petrochemical. However, Daoming OpticsChemical is 1.84 times more volatile than Rongsheng Petrochemical Co. It trades about 0.03 of its potential returns per unit of risk. Rongsheng Petrochemical Co is currently generating about -0.05 per unit of risk. If you would invest 742.00 in Daoming OpticsChemical Co on November 7, 2024 and sell it today you would earn a total of 72.00 from holding Daoming OpticsChemical Co or generate 9.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daoming OpticsChemical Co vs. Rongsheng Petrochemical Co
Performance |
| Timeline |
| Daoming OpticsChemical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Rongsheng Petrochemical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Daoming OpticsChemical and Rongsheng Petrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daoming OpticsChemical and Rongsheng Petrochemical
The main advantage of trading using opposite Daoming OpticsChemical and Rongsheng Petrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daoming OpticsChemical position performs unexpectedly, Rongsheng Petrochemical 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 Rongsheng Petrochemical will offset losses from the drop in Rongsheng Petrochemical's long position.The idea behind Daoming OpticsChemical Co and Rongsheng Petrochemical Co 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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