Correlation Between Western Metal and Dongxing Sec

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

By analyzing existing cross correlation between Western Metal Materials and Dongxing Sec Co, you can compare the effects of market volatilities on Western Metal and Dongxing Sec 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 Western Metal with a short position of Dongxing Sec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Metal and Dongxing Sec.

Diversification Opportunities for Western Metal and Dongxing Sec

0.57

Correlation Coefficient

Western Metal  Dongxing Sec

Very weak diversification

The 3 months correlation between Western and Dongxing is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Western Metal Materials and Dongxing Sec Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongxing Sec and Western Metal 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 Western Metal Materials are associated (or correlated) with Dongxing Sec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongxing Sec has no effect on the direction of Western Metal i.e., Western Metal and Dongxing Sec go up and down completely randomly.

Pair Corralation between Western Metal and Dongxing Sec

Assuming the 90 days trading horizon Western Metal is expected to generate 1.29 times less return on investment than Dongxing Sec. In addition to that, Western Metal is 1.21 times more volatile than Dongxing Sec Co. It trades about 0.02 of its total potential returns per unit of risk. Dongxing Sec Co is currently generating about 0.03 per unit of volatility. If you would invest  823.00  in Dongxing Sec Co on October 5, 2024 and sell it today you would earn a total of  212.00  from holding Dongxing Sec Co or generate 25.76% return on investment over 90 days.

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

Western Metal Materials  vs.  Dongxing Sec Co

Western Metal Materials

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Western Metal Materials are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Western Metal may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Dongxing Sec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongxing Sec 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.

Pair Trading with Western Metal and Dongxing Sec

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

The idea behind Western Metal Materials and Dongxing Sec 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.