Correlation Between Cloud Air and Daiyang Metal

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

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

Diversification Opportunities for Cloud Air and Daiyang Metal

0.2

Correlation Coefficient

Cloud Air  Daiyang Metal

Modest diversification

The 3 months correlation between Cloud and Daiyang is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Cloud Air CoLtd and Daiyang Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daiyang Metal and Cloud Air 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 Cloud Air CoLtd are associated (or correlated) with Daiyang Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daiyang Metal has no effect on the direction of Cloud Air i.e., Cloud Air and Daiyang Metal go up and down completely randomly.

Pair Corralation between Cloud Air and Daiyang Metal

Assuming the 90 days trading horizon Cloud Air CoLtd is expected to under-perform the Daiyang Metal. But the stock apears to be less risky and, when comparing its historical volatility, Cloud Air CoLtd is 1.29 times less risky than Daiyang Metal. The stock trades about 0.0 of its potential returns per unit of risk. The Daiyang Metal Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  149,400  in Daiyang Metal Co on October 26, 2024 and sell it today you would earn a total of  3,100  from holding Daiyang Metal Co or generate 2.07% return on investment over 90 days.

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

Cloud Air CoLtd  vs.  Daiyang Metal Co

Cloud Air CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

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

Daiyang Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daiyang Metal 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 Cloud Air and Daiyang Metal

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

The idea behind Cloud Air CoLtd and Daiyang Metal 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.