Correlation Between Dow and Ganfeng Lithium

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

By analyzing existing cross correlation between Dow Inc and Ganfeng Lithium Co, you can compare the effects of market volatilities on Dow and Ganfeng Lithium 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 Dow with a short position of Ganfeng Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow and Ganfeng Lithium.

Diversification Opportunities for Dow and Ganfeng Lithium

-0.24

Correlation Coefficient

Dow  Ganfeng Lithium

Very good diversification

The 3 months correlation between Dow and Ganfeng is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Dow Inc and Ganfeng Lithium Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ganfeng Lithium and Dow 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 Dow Inc are associated (or correlated) with Ganfeng Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ganfeng Lithium has no effect on the direction of Dow i.e., Dow and Ganfeng Lithium go up and down completely randomly.

Pair Corralation between Dow and Ganfeng Lithium

Considering the 90-day investment horizon Dow Inc is expected to under-perform the Ganfeng Lithium. But the stock apears to be less risky and, when comparing its historical volatility, Dow Inc is 4.41 times less risky than Ganfeng Lithium. The stock trades about -0.29 of its potential returns per unit of risk. The Ganfeng Lithium Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  244.00  in Ganfeng Lithium Co on September 24, 2024 and sell it today you would earn a total of  21.00  from holding Ganfeng Lithium Co or generate 8.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Dow Inc  vs.  Ganfeng Lithium Co

Dow Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dow Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Ganfeng Lithium

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ganfeng Lithium Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ganfeng Lithium reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dow and Ganfeng Lithium

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

The idea behind Dow Inc and Ganfeng Lithium Co 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..