Correlation Between Advanced Echem and Daxin Materials
Can any of the company-specific risk be diversified away by investing in both Advanced Echem and Daxin Materials 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 Advanced Echem and Daxin Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Echem Materials and Daxin Materials Corp, you can compare the effects of market volatilities on Advanced Echem and Daxin Materials 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 Advanced Echem with a short position of Daxin Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Echem and Daxin Materials.
Diversification Opportunities for Advanced Echem and Daxin Materials
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Advanced and Daxin is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Echem Materials and Daxin Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daxin Materials Corp and Advanced Echem 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 Advanced Echem Materials are associated (or correlated) with Daxin Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daxin Materials Corp has no effect on the direction of Advanced Echem i.e., Advanced Echem and Daxin Materials go up and down completely randomly.
Pair Corralation between Advanced Echem and Daxin Materials
Assuming the 90 days trading horizon Advanced Echem Materials is expected to under-perform the Daxin Materials. But the stock apears to be less risky and, when comparing its historical volatility, Advanced Echem Materials is 1.6 times less risky than Daxin Materials. The stock trades about -0.22 of its potential returns per unit of risk. The Daxin Materials Corp is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 22,650 in Daxin Materials Corp on September 2, 2024 and sell it today you would lose (2,200) from holding Daxin Materials Corp or give up 9.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advanced Echem Materials vs. Daxin Materials Corp
Performance |
| Timeline |
| Advanced Echem Materials |
| Daxin Materials Corp |
Advanced Echem and Daxin Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Echem and Daxin Materials
The main advantage of trading using opposite Advanced Echem and Daxin Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Echem position performs unexpectedly, Daxin Materials 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 Daxin Materials will offset losses from the drop in Daxin Materials' long position.| Advanced Echem vs. Tang Eng Iron | Advanced Echem vs. Ichia Technologies | Advanced Echem vs. Camellia Metal Co | Advanced Echem vs. China Times Publishing |
| Daxin Materials vs. Topco Scientific Co | Daxin Materials vs. Holtek Semiconductor | Daxin Materials vs. Greatek Electronics | Daxin Materials vs. Stark Technology |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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