Correlation Between DR and Amlogic Shanghai

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

By analyzing existing cross correlation between DR Limited and Amlogic Shanghai Co, you can compare the effects of market volatilities on DR and Amlogic Shanghai 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 DR with a short position of Amlogic Shanghai. Check out your portfolio center. Please also check ongoing floating volatility patterns of DR and Amlogic Shanghai.

Diversification Opportunities for DR and Amlogic Shanghai

0.85

Correlation Coefficient

DR  Amlogic Shanghai

Very poor diversification

The 3 months correlation between DR and Amlogic is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding DR Limited and Amlogic Shanghai Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amlogic Shanghai and DR 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 DR Limited are associated (or correlated) with Amlogic Shanghai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amlogic Shanghai has no effect on the direction of DR i.e., DR and Amlogic Shanghai go up and down completely randomly.

Pair Corralation between DR and Amlogic Shanghai

Assuming the 90 days trading horizon DR Limited is expected to under-perform the Amlogic Shanghai. But the stock apears to be less risky and, when comparing its historical volatility, DR Limited is 1.15 times less risky than Amlogic Shanghai. The stock trades about -0.05 of its potential returns per unit of risk. The Amlogic Shanghai Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  7,168  in Amlogic Shanghai Co on September 19, 2024 and sell it today you would lose (78.00) from holding Amlogic Shanghai Co or give up 1.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

DR Limited  vs.  Amlogic Shanghai Co

DR Limited

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DR Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DR sustained solid returns over the last few months and may actually be approaching a breakup point.

Amlogic Shanghai

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amlogic Shanghai Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Amlogic Shanghai sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DR and Amlogic Shanghai

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

The idea behind DR Limited and Amlogic Shanghai 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 Commodity Directory module to find actively traded commodities issued by global exchanges.