Correlation Between Central Plains and Dongfeng Automobile

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Central Plains and Dongfeng Automobile 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 Central Plains and Dongfeng Automobile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Plains Environment and Dongfeng Automobile Co, you can compare the effects of market volatilities on Central Plains and Dongfeng Automobile 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 Central Plains with a short position of Dongfeng Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Plains and Dongfeng Automobile.

Diversification Opportunities for Central Plains and Dongfeng Automobile

0.45
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Central and Dongfeng is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Central Plains Environment and Dongfeng Automobile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongfeng Automobile and Central Plains 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 Central Plains Environment are associated (or correlated) with Dongfeng Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongfeng Automobile has no effect on the direction of Central Plains i.e., Central Plains and Dongfeng Automobile go up and down completely randomly.

Pair Corralation between Central Plains and Dongfeng Automobile

Assuming the 90 days trading horizon Central Plains Environment is expected to generate 0.46 times more return on investment than Dongfeng Automobile. However, Central Plains Environment is 2.17 times less risky than Dongfeng Automobile. It trades about -0.02 of its potential returns per unit of risk. Dongfeng Automobile Co is currently generating about -0.04 per unit of risk. If you would invest  874.00  in Central Plains Environment on December 26, 2024 and sell it today you would lose (13.00) from holding Central Plains Environment or give up 1.49% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Central Plains Environment  vs.  Dongfeng Automobile Co

 Performance 
       Timeline  
Central Plains Envir 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Central Plains Environment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Central Plains is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Dongfeng Automobile 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Dongfeng Automobile Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Central Plains and Dongfeng Automobile Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Central Plains and Dongfeng Automobile

The main advantage of trading using opposite Central Plains and Dongfeng Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Plains position performs unexpectedly, Dongfeng Automobile 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 Dongfeng Automobile will offset losses from the drop in Dongfeng Automobile's long position.
The idea behind Central Plains Environment and Dongfeng Automobile 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

Other Complementary Tools

Alpha Finder
Use alpha and beta coefficients to find investment opportunities after accounting for the risk
Aroon Oscillator
Analyze current equity momentum using Aroon Oscillator and other momentum ratios
ETFs
Find actively traded Exchange Traded Funds (ETF) from around the world
Top Crypto Exchanges
Search and analyze digital assets across top global cryptocurrency exchanges
Economic Indicators
Top statistical indicators that provide insights into how an economy is performing