Correlation Between Double Medical and Liaoning Dingjide

Can any of the company-specific risk be diversified away by investing in both Double Medical and Liaoning Dingjide 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 Double Medical and Liaoning Dingjide into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Double Medical Technology and Liaoning Dingjide Petrochemical, you can compare the effects of market volatilities on Double Medical and Liaoning Dingjide 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 Double Medical with a short position of Liaoning Dingjide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Double Medical and Liaoning Dingjide.

Diversification Opportunities for Double Medical and Liaoning Dingjide

0.29

Correlation Coefficient

Double Medical  Liaoning Dingjide

Modest diversification

The 3 months correlation between Double and Liaoning is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Double Medical Technology and Liaoning Dingjide Petrochemica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liaoning Dingjide and Double Medical 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 Double Medical Technology are associated (or correlated) with Liaoning Dingjide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liaoning Dingjide has no effect on the direction of Double Medical i.e., Double Medical and Liaoning Dingjide go up and down completely randomly.

Pair Corralation between Double Medical and Liaoning Dingjide

Assuming the 90 days trading horizon Double Medical Technology is expected to under-perform the Liaoning Dingjide. But the stock apears to be less risky and, when comparing its historical volatility, Double Medical Technology is 1.94 times less risky than Liaoning Dingjide. The stock trades about -0.11 of its potential returns per unit of risk. The Liaoning Dingjide Petrochemical is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,039  in Liaoning Dingjide Petrochemical on September 27, 2024 and sell it today you would earn a total of  75.00  from holding Liaoning Dingjide Petrochemical or generate 2.47% return on investment over 90 days.

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

Double Medical Technology  vs.  Liaoning Dingjide Petrochemica

Double Medical Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Double Medical Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Double Medical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Liaoning Dingjide

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Liaoning Dingjide Petrochemical are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Liaoning Dingjide sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Double Medical and Liaoning Dingjide

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

The idea behind Double Medical Technology and Liaoning Dingjide Petrochemical 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.