Correlation Between Guangdong Wens and Dazhong Transportation

Can any of the company-specific risk be diversified away by investing in both Guangdong Wens and Dazhong Transportation 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 Guangdong Wens and Dazhong Transportation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guangdong Wens Foodstuff and Dazhong Transportation Group, you can compare the effects of market volatilities on Guangdong Wens and Dazhong Transportation 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 Guangdong Wens with a short position of Dazhong Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Wens and Dazhong Transportation.

Diversification Opportunities for Guangdong Wens and Dazhong Transportation

-0.03

Correlation Coefficient

Guangdong Wens  Dazhong Transportation

Good diversification

The 3 months correlation between Guangdong and Dazhong is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Wens Foodstuff and Dazhong Transportation Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dazhong Transportation and Guangdong Wens 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 Guangdong Wens Foodstuff are associated (or correlated) with Dazhong Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dazhong Transportation has no effect on the direction of Guangdong Wens i.e., Guangdong Wens and Dazhong Transportation go up and down completely randomly.

Pair Corralation between Guangdong Wens and Dazhong Transportation

Assuming the 90 days trading horizon Guangdong Wens Foodstuff is expected to under-perform the Dazhong Transportation. But the stock apears to be less risky and, when comparing its historical volatility, Guangdong Wens Foodstuff is 1.4 times less risky than Dazhong Transportation. The stock trades about -0.01 of its potential returns per unit of risk. The Dazhong Transportation Group is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Dazhong Transportation Group on October 11, 2024 and sell it today you would lose (3.00) from holding Dazhong Transportation Group or give up 12.0% of portfolio value over 90 days.

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

Guangdong Wens Foodstuff  vs.  Dazhong Transportation Group

Guangdong Wens Foodstuff

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guangdong Wens Foodstuff 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.

Dazhong Transportation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Guangdong Wens and Dazhong Transportation

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

The idea behind Guangdong Wens Foodstuff and Dazhong Transportation Group 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.