Correlation Between Wanhua Chemical and Dymatic Chemicals

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Can any of the company-specific risk be diversified away by investing in both Wanhua Chemical and Dymatic 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 Wanhua Chemical and Dymatic Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wanhua Chemical Group and Dymatic Chemicals, you can compare the effects of market volatilities on Wanhua Chemical and Dymatic 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 Wanhua Chemical with a short position of Dymatic Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wanhua Chemical and Dymatic Chemicals.

Diversification Opportunities for Wanhua Chemical and Dymatic Chemicals

-0.15
  Correlation Coefficient

Good diversification

The 3 months correlation between Wanhua and Dymatic is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Wanhua Chemical Group and Dymatic Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dymatic Chemicals and Wanhua Chemical 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 Wanhua Chemical Group are associated (or correlated) with Dymatic Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dymatic Chemicals has no effect on the direction of Wanhua Chemical i.e., Wanhua Chemical and Dymatic Chemicals go up and down completely randomly.

Pair Corralation between Wanhua Chemical and Dymatic Chemicals

Assuming the 90 days trading horizon Wanhua Chemical Group is expected to under-perform the Dymatic Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, Wanhua Chemical Group is 1.37 times less risky than Dymatic Chemicals. The stock trades about -0.04 of its potential returns per unit of risk. The Dymatic Chemicals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  476.00  in Dymatic Chemicals on October 26, 2024 and sell it today you would earn a total of  117.00  from holding Dymatic Chemicals or generate 24.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Wanhua Chemical Group  vs.  Dymatic Chemicals

 Performance 
       Timeline  
Wanhua Chemical Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Wanhua Chemical Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Dymatic Chemicals 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Dymatic Chemicals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dymatic Chemicals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Wanhua Chemical and Dymatic Chemicals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Wanhua Chemical and Dymatic Chemicals

The main advantage of trading using opposite Wanhua Chemical and Dymatic Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wanhua Chemical position performs unexpectedly, Dymatic 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 Dymatic Chemicals will offset losses from the drop in Dymatic Chemicals' long position.
The idea behind Wanhua Chemical Group and Dymatic Chemicals 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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