Correlation Between Iat Automobile and Dongnan Electronics

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Can any of the company-specific risk be diversified away by investing in both Iat Automobile and Dongnan Electronics 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 Iat Automobile and Dongnan Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iat Automobile Technology and Dongnan Electronics Co, you can compare the effects of market volatilities on Iat Automobile and Dongnan Electronics 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 Iat Automobile with a short position of Dongnan Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iat Automobile and Dongnan Electronics.

Diversification Opportunities for Iat Automobile and Dongnan Electronics

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Iat and Dongnan is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Iat Automobile Technology and Dongnan Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongnan Electronics and Iat Automobile 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 Iat Automobile Technology are associated (or correlated) with Dongnan Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongnan Electronics has no effect on the direction of Iat Automobile i.e., Iat Automobile and Dongnan Electronics go up and down completely randomly.

Pair Corralation between Iat Automobile and Dongnan Electronics

Assuming the 90 days trading horizon Iat Automobile is expected to generate 1.89 times less return on investment than Dongnan Electronics. In addition to that, Iat Automobile is 1.01 times more volatile than Dongnan Electronics Co. It trades about 0.02 of its total potential returns per unit of risk. Dongnan Electronics Co is currently generating about 0.03 per unit of volatility. If you would invest  1,888  in Dongnan Electronics Co on October 9, 2024 and sell it today you would earn a total of  138.00  from holding Dongnan Electronics Co or generate 7.31% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Iat Automobile Technology  vs.  Dongnan Electronics Co

 Performance 
       Timeline  
Iat Automobile Technology 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

0 of 100

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

Iat Automobile and Dongnan Electronics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Iat Automobile and Dongnan Electronics

The main advantage of trading using opposite Iat Automobile and Dongnan Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iat Automobile position performs unexpectedly, Dongnan Electronics 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 Dongnan Electronics will offset losses from the drop in Dongnan Electronics' long position.
The idea behind Iat Automobile Technology and Dongnan Electronics 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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