Correlation Between ButOne Information and Shenyang Chemical

Can any of the company-specific risk be diversified away by investing in both ButOne Information and Shenyang Chemical 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 ButOne Information and Shenyang Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ButOne Information Corp and Shenyang Chemical Industry, you can compare the effects of market volatilities on ButOne Information and Shenyang Chemical 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 ButOne Information with a short position of Shenyang Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of ButOne Information and Shenyang Chemical.

Diversification Opportunities for ButOne Information and Shenyang Chemical

0.94

Correlation Coefficient

ButOne Information  Shenyang Chemical

Almost no diversification

The 3 months correlation between ButOne and Shenyang is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding ButOne Information Corp and Shenyang Chemical Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenyang Chemical and ButOne Information 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 ButOne Information Corp are associated (or correlated) with Shenyang Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenyang Chemical has no effect on the direction of ButOne Information i.e., ButOne Information and Shenyang Chemical go up and down completely randomly.

Pair Corralation between ButOne Information and Shenyang Chemical

Assuming the 90 days trading horizon ButOne Information is expected to generate 1.01 times less return on investment than Shenyang Chemical. In addition to that, ButOne Information is 1.22 times more volatile than Shenyang Chemical Industry. It trades about 0.2 of its total potential returns per unit of risk. Shenyang Chemical Industry is currently generating about 0.25 per unit of volatility. If you would invest  257.00  in Shenyang Chemical Industry on September 13, 2024 and sell it today you would earn a total of  138.00  from holding Shenyang Chemical Industry or generate 53.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.28%
Values	Daily Returns

ButOne Information Corp  vs.  Shenyang Chemical Industry

ButOne Information Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ButOne Information Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ButOne Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenyang Chemical

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shenyang Chemical Industry are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenyang Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ButOne Information and Shenyang Chemical

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

The idea behind ButOne Information Corp and Shenyang Chemical Industry 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.