Correlation Between Chinese Maritime and Dawushan Farm

Can any of the company-specific risk be diversified away by investing in both Chinese Maritime and Dawushan Farm 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 Chinese Maritime and Dawushan Farm into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chinese Maritime Transport and Dawushan Farm Tech, you can compare the effects of market volatilities on Chinese Maritime and Dawushan Farm 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 Chinese Maritime with a short position of Dawushan Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chinese Maritime and Dawushan Farm.

Diversification Opportunities for Chinese Maritime and Dawushan Farm

-0.15

Correlation Coefficient

Chinese Maritime  Dawushan Farm

Good diversification

The 3 months correlation between Chinese and Dawushan is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Chinese Maritime Transport and Dawushan Farm Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dawushan Farm Tech and Chinese Maritime 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 Chinese Maritime Transport are associated (or correlated) with Dawushan Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dawushan Farm Tech has no effect on the direction of Chinese Maritime i.e., Chinese Maritime and Dawushan Farm go up and down completely randomly.

Pair Corralation between Chinese Maritime and Dawushan Farm

Assuming the 90 days trading horizon Chinese Maritime Transport is expected to under-perform the Dawushan Farm. But the stock apears to be less risky and, when comparing its historical volatility, Chinese Maritime Transport is 2.19 times less risky than Dawushan Farm. The stock trades about -0.52 of its potential returns per unit of risk. The Dawushan Farm Tech is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  4,300  in Dawushan Farm Tech on September 23, 2024 and sell it today you would earn a total of  550.00  from holding Dawushan Farm Tech or generate 12.79% return on investment over 90 days.

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

Chinese Maritime Transport  vs.  Dawushan Farm Tech

Chinese Maritime Tra

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chinese Maritime Transport has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chinese Maritime is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Dawushan Farm Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dawushan Farm Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Dawushan Farm is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Chinese Maritime and Dawushan Farm

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

The idea behind Chinese Maritime Transport and Dawushan Farm Tech 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.