Correlation Between Dongfeng Automobile and Zhejiang Qianjiang

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

By analyzing existing cross correlation between Dongfeng Automobile Co and Zhejiang Qianjiang Motorcycle, you can compare the effects of market volatilities on Dongfeng Automobile and Zhejiang Qianjiang 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 Dongfeng Automobile with a short position of Zhejiang Qianjiang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongfeng Automobile and Zhejiang Qianjiang.

Diversification Opportunities for Dongfeng Automobile and Zhejiang Qianjiang

-0.07

Correlation Coefficient

Dongfeng Automobile  Zhejiang Qianjiang

Good diversification

The 3 months correlation between Dongfeng and Zhejiang is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Dongfeng Automobile Co and Zhejiang Qianjiang Motorcycle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Qianjiang and Dongfeng 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 Dongfeng Automobile Co are associated (or correlated) with Zhejiang Qianjiang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Qianjiang has no effect on the direction of Dongfeng Automobile i.e., Dongfeng Automobile and Zhejiang Qianjiang go up and down completely randomly.

Pair Corralation between Dongfeng Automobile and Zhejiang Qianjiang

Assuming the 90 days trading horizon Dongfeng Automobile Co is expected to under-perform the Zhejiang Qianjiang. In addition to that, Dongfeng Automobile is 1.22 times more volatile than Zhejiang Qianjiang Motorcycle. It trades about 0.0 of its total potential returns per unit of risk. Zhejiang Qianjiang Motorcycle is currently generating about 0.05 per unit of volatility. If you would invest  1,706  in Zhejiang Qianjiang Motorcycle on December 2, 2024 and sell it today you would earn a total of  99.00  from holding Zhejiang Qianjiang Motorcycle or generate 5.8% return on investment over 90 days.

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

Dongfeng Automobile Co  vs.  Zhejiang Qianjiang Motorcycle

Dongfeng Automobile

Risk-Adjusted Performance

Very Weak

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

Zhejiang Qianjiang

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Qianjiang Motorcycle are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Qianjiang may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Dongfeng Automobile and Zhejiang Qianjiang

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

The idea behind Dongfeng Automobile Co and Zhejiang Qianjiang Motorcycle 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.