Correlation Between Polaris Office and Dongnam Chemical

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

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

Diversification Opportunities for Polaris Office and Dongnam Chemical

-0.76

Correlation Coefficient

Polaris Office  Dongnam Chemical

Pay attention - limited upside

The 3 months correlation between Polaris and Dongnam is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Polaris Office Corp and Dongnam Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongnam Chemical and Polaris Office 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 Polaris Office Corp are associated (or correlated) with Dongnam Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongnam Chemical has no effect on the direction of Polaris Office i.e., Polaris Office and Dongnam Chemical go up and down completely randomly.

Pair Corralation between Polaris Office and Dongnam Chemical

Assuming the 90 days trading horizon Polaris Office Corp is expected to under-perform the Dongnam Chemical. In addition to that, Polaris Office is 4.46 times more volatile than Dongnam Chemical Co. It trades about -0.09 of its total potential returns per unit of risk. Dongnam Chemical Co is currently generating about 0.1 per unit of volatility. If you would invest  3,123,245  in Dongnam Chemical Co on July 7, 2024 and sell it today you would earn a total of  201,755  from holding Dongnam Chemical Co or generate 6.46% return on investment over 90 days.

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

Polaris Office Corp  vs.  Dongnam Chemical Co

Polaris Office Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Polaris Office Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in November 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Dongnam Chemical

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dongnam Chemical Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongnam Chemical may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with Polaris Office and Dongnam Chemical

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

The idea behind Polaris Office Corp and Dongnam Chemical 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.