Correlation Between Dymatic Chemicals and Masterwork Machinery

Can any of the company-specific risk be diversified away by investing in both Dymatic Chemicals and Masterwork Machinery 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 Dymatic Chemicals and Masterwork Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dymatic Chemicals and Masterwork Machinery, you can compare the effects of market volatilities on Dymatic Chemicals and Masterwork Machinery 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 Dymatic Chemicals with a short position of Masterwork Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dymatic Chemicals and Masterwork Machinery.

Diversification Opportunities for Dymatic Chemicals and Masterwork Machinery

0.85

Correlation Coefficient

Dymatic Chemicals  Masterwork Machinery

Very poor diversification

The 3 months correlation between Dymatic and Masterwork is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Dymatic Chemicals and Masterwork Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masterwork Machinery and Dymatic Chemicals 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 Dymatic Chemicals are associated (or correlated) with Masterwork Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masterwork Machinery has no effect on the direction of Dymatic Chemicals i.e., Dymatic Chemicals and Masterwork Machinery go up and down completely randomly.

Pair Corralation between Dymatic Chemicals and Masterwork Machinery

Assuming the 90 days trading horizon Dymatic Chemicals is expected to generate 2.69 times less return on investment than Masterwork Machinery. But when comparing it to its historical volatility, Dymatic Chemicals is 1.32 times less risky than Masterwork Machinery. It trades about 0.01 of its potential returns per unit of risk. Masterwork Machinery is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  680.00  in Masterwork Machinery on September 24, 2024 and sell it today you would lose (46.00) from holding Masterwork Machinery or give up 6.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Dymatic Chemicals  vs.  Masterwork Machinery

Dymatic Chemicals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dymatic Chemicals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dymatic Chemicals sustained solid returns over the last few months and may actually be approaching a breakup point.

Masterwork Machinery

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Masterwork Machinery are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Masterwork Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dymatic Chemicals and Masterwork Machinery

The main advantage of trading using opposite Dymatic Chemicals and Masterwork Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dymatic Chemicals position performs unexpectedly, Masterwork Machinery 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 Masterwork Machinery will offset losses from the drop in Masterwork Machinery's long position.

The idea behind Dymatic Chemicals and Masterwork Machinery 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.

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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.