Correlation Between ZhongAn Online and DNB BANK

Can any of the company-specific risk be diversified away by investing in both ZhongAn Online and DNB BANK 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 ZhongAn Online and DNB BANK into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ZhongAn Online P and DNB BANK ASA, you can compare the effects of market volatilities on ZhongAn Online and DNB BANK 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 ZhongAn Online with a short position of DNB BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZhongAn Online and DNB BANK.

Diversification Opportunities for ZhongAn Online and DNB BANK

0.36

Correlation Coefficient

ZhongAn Online  DNB BANK

Weak diversification

The 3 months correlation between ZhongAn and DNB is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding ZhongAn Online P and DNB BANK ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DNB BANK ASA and ZhongAn Online 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 ZhongAn Online P are associated (or correlated) with DNB BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DNB BANK ASA has no effect on the direction of ZhongAn Online i.e., ZhongAn Online and DNB BANK go up and down completely randomly.

Pair Corralation between ZhongAn Online and DNB BANK

Assuming the 90 days trading horizon ZhongAn Online is expected to generate 1.78 times less return on investment than DNB BANK. In addition to that, ZhongAn Online is 2.56 times more volatile than DNB BANK ASA. It trades about 0.05 of its total potential returns per unit of risk. DNB BANK ASA is currently generating about 0.24 per unit of volatility. If you would invest  1,892  in DNB BANK ASA on December 21, 2024 and sell it today you would earn a total of  485.00  from holding DNB BANK ASA or generate 25.63% return on investment over 90 days.

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

ZhongAn Online P  vs.  DNB BANK ASA

ZhongAn Online P

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ZhongAn Online P are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ZhongAn Online unveiled solid returns over the last few months and may actually be approaching a breakup point.

DNB BANK ASA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DNB BANK ASA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DNB BANK reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ZhongAn Online and DNB BANK

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

The idea behind ZhongAn Online P and DNB BANK ASA 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.