Correlation Between Dongguan Aohai and Panda Financial

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

By analyzing existing cross correlation between Dongguan Aohai Technology and Panda Financial Holding, you can compare the effects of market volatilities on Dongguan Aohai and Panda Financial 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 Dongguan Aohai with a short position of Panda Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongguan Aohai and Panda Financial.

Diversification Opportunities for Dongguan Aohai and Panda Financial

0.85

Correlation Coefficient

Dongguan Aohai  Panda Financial

Very poor diversification

The 3 months correlation between Dongguan and Panda is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Dongguan Aohai Technology and Panda Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Panda Financial Holding and Dongguan Aohai 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 Dongguan Aohai Technology are associated (or correlated) with Panda Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Panda Financial Holding has no effect on the direction of Dongguan Aohai i.e., Dongguan Aohai and Panda Financial go up and down completely randomly.

Pair Corralation between Dongguan Aohai and Panda Financial

Assuming the 90 days trading horizon Dongguan Aohai Technology is expected to generate 1.61 times more return on investment than Panda Financial. However, Dongguan Aohai is 1.61 times more volatile than Panda Financial Holding. It trades about 0.16 of its potential returns per unit of risk. Panda Financial Holding is currently generating about 0.14 per unit of risk. If you would invest  3,406  in Dongguan Aohai Technology on September 16, 2024 and sell it today you would earn a total of  504.00  from holding Dongguan Aohai Technology or generate 14.8% return on investment over 90 days.

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

Dongguan Aohai Technology  vs.  Panda Financial Holding

Dongguan Aohai Technology

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dongguan Aohai Technology are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongguan Aohai sustained solid returns over the last few months and may actually be approaching a breakup point.

Panda Financial Holding

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Panda Financial Holding are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Panda Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dongguan Aohai and Panda Financial

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

The idea behind Dongguan Aohai Technology and Panda Financial Holding 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.