Correlation Between Dongbang Transport and Solution Advanced

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

By analyzing existing cross correlation between Dongbang Transport Logistics and Solution Advanced Technology, you can compare the effects of market volatilities on Dongbang Transport and Solution Advanced 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 Dongbang Transport with a short position of Solution Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongbang Transport and Solution Advanced.

Diversification Opportunities for Dongbang Transport and Solution Advanced

0.77

Correlation Coefficient

Dongbang Transport  Solution Advanced

Poor diversification

The 3 months correlation between Dongbang and Solution is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Dongbang Transport Logistics and Solution Advanced Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution Advanced and Dongbang Transport 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 Dongbang Transport Logistics are associated (or correlated) with Solution Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Advanced has no effect on the direction of Dongbang Transport i.e., Dongbang Transport and Solution Advanced go up and down completely randomly.

Pair Corralation between Dongbang Transport and Solution Advanced

Assuming the 90 days trading horizon Dongbang Transport Logistics is expected to generate 0.96 times more return on investment than Solution Advanced. However, Dongbang Transport Logistics is 1.04 times less risky than Solution Advanced. It trades about -0.04 of its potential returns per unit of risk. Solution Advanced Technology is currently generating about -0.05 per unit of risk. If you would invest  236,500  in Dongbang Transport Logistics on October 6, 2024 and sell it today you would lose (14,000) from holding Dongbang Transport Logistics or give up 5.92% of portfolio value over 90 days.

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

Dongbang Transport Logistics  vs.  Solution Advanced Technology

Dongbang Transport

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongbang Transport Logistics 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Solution Advanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solution Advanced Technology 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Dongbang Transport and Solution Advanced

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

The idea behind Dongbang Transport Logistics and Solution Advanced Technology 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.