Correlation Between Oriental Union and Everlight Chemical
Can any of the company-specific risk be diversified away by investing in both Oriental Union and Everlight Chemical 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 Oriental Union and Everlight Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oriental Union Chemical and Everlight Chemical Industrial, you can compare the effects of market volatilities on Oriental Union and Everlight Chemical 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 Oriental Union with a short position of Everlight Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oriental Union and Everlight Chemical.
Diversification Opportunities for Oriental Union and Everlight Chemical
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Oriental and Everlight is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Oriental Union Chemical and Everlight Chemical Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everlight Chemical and Oriental Union 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 Oriental Union Chemical are associated (or correlated) with Everlight Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everlight Chemical has no effect on the direction of Oriental Union i.e., Oriental Union and Everlight Chemical go up and down completely randomly.
Pair Corralation between Oriental Union and Everlight Chemical
Assuming the 90 days trading horizon Oriental Union Chemical is expected to under-perform the Everlight Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Oriental Union Chemical is 1.46 times less risky than Everlight Chemical. The stock trades about -0.03 of its potential returns per unit of risk. The Everlight Chemical Industrial is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,885 in Everlight Chemical Industrial on November 2, 2024 and sell it today you would earn a total of 235.00 from holding Everlight Chemical Industrial or generate 12.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oriental Union Chemical vs. Everlight Chemical Industrial
Performance |
| Timeline |
| Oriental Union Chemical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Everlight Chemical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Oriental Union and Everlight Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oriental Union and Everlight Chemical
The main advantage of trading using opposite Oriental Union and Everlight Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oriental Union position performs unexpectedly, Everlight Chemical 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 Everlight Chemical will offset losses from the drop in Everlight Chemical's long position.The idea behind Oriental Union Chemical and Everlight Chemical Industrial 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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