Correlation Between Daya Materials and Hengyuan Refining

Can any of the company-specific risk be diversified away by investing in both Daya Materials and Hengyuan Refining 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 Daya Materials and Hengyuan Refining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Daya Materials Bhd and Hengyuan Refining, you can compare the effects of market volatilities on Daya Materials and Hengyuan Refining 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 Daya Materials with a short position of Hengyuan Refining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daya Materials and Hengyuan Refining.

Diversification Opportunities for Daya Materials and Hengyuan Refining

0.33

Correlation Coefficient

Daya Materials  Hengyuan Refining

Weak diversification

The 3 months correlation between Daya and Hengyuan is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Daya Materials Bhd and Hengyuan Refining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengyuan Refining and Daya Materials 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 Daya Materials Bhd are associated (or correlated) with Hengyuan Refining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengyuan Refining has no effect on the direction of Daya Materials i.e., Daya Materials and Hengyuan Refining go up and down completely randomly.

Pair Corralation between Daya Materials and Hengyuan Refining

Assuming the 90 days trading horizon Daya Materials Bhd is expected to under-perform the Hengyuan Refining. But the stock apears to be less risky and, when comparing its historical volatility, Daya Materials Bhd is 1.03 times less risky than Hengyuan Refining. The stock trades about -0.04 of its potential returns per unit of risk. The Hengyuan Refining is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  200.00  in Hengyuan Refining on September 12, 2024 and sell it today you would earn a total of  17.00  from holding Hengyuan Refining or generate 8.5% return on investment over 90 days.

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

Daya Materials Bhd  vs.  Hengyuan Refining

Daya Materials Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daya Materials Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Hengyuan Refining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hengyuan Refining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Hengyuan Refining disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Daya Materials and Hengyuan Refining

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

The idea behind Daya Materials Bhd and Hengyuan Refining 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .