Correlation Between Southern Rubber and Ducgiang Chemicals
Can any of the company-specific risk be diversified away by investing in both Southern Rubber 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 Southern Rubber and Ducgiang Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Rubber Industry and Ducgiang Chemicals Detergent, you can compare the effects of market volatilities on Southern Rubber 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 Southern Rubber with a short position of Ducgiang Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Rubber and Ducgiang Chemicals.
Diversification Opportunities for Southern Rubber and Ducgiang Chemicals
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Southern and Ducgiang is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Southern Rubber Industry and Ducgiang Chemicals Detergent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ducgiang Chemicals and Southern Rubber 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 Southern Rubber Industry 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 Southern Rubber i.e., Southern Rubber and Ducgiang Chemicals go up and down completely randomly.
Pair Corralation between Southern Rubber and Ducgiang Chemicals
Assuming the 90 days trading horizon Southern Rubber Industry is expected to generate 2.77 times more return on investment than Ducgiang Chemicals. However, Southern Rubber is 2.77 times more volatile than Ducgiang Chemicals Detergent. It trades about 0.1 of its potential returns per unit of risk. Ducgiang Chemicals Detergent is currently generating about -0.06 per unit of risk. If you would invest 1,445,000 in Southern Rubber Industry on November 7, 2024 and sell it today you would earn a total of 55,000 from holding Southern Rubber Industry or generate 3.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Rubber Industry vs. Ducgiang Chemicals Detergent
Performance |
| Timeline |
| Southern Rubber Industry |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
| Ducgiang Chemicals |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Southern Rubber and Ducgiang Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern Rubber and Ducgiang Chemicals
The main advantage of trading using opposite Southern Rubber and Ducgiang Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Rubber 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 Southern Rubber Industry 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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