Correlation Between Dongfeng Automobile and Sanquan Food

Can any of the company-specific risk be diversified away by investing in both Dongfeng Automobile and Sanquan Food 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 Sanquan Food 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 Sanquan Food Co, you can compare the effects of market volatilities on Dongfeng Automobile and Sanquan Food 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 Sanquan Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongfeng Automobile and Sanquan Food.

Diversification Opportunities for Dongfeng Automobile and Sanquan Food

0.81

Correlation Coefficient

Dongfeng Automobile  Sanquan Food

Very poor diversification

The 3 months correlation between Dongfeng and Sanquan is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Dongfeng Automobile Co and Sanquan Food Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanquan Food 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 Sanquan Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanquan Food has no effect on the direction of Dongfeng Automobile i.e., Dongfeng Automobile and Sanquan Food go up and down completely randomly.

Pair Corralation between Dongfeng Automobile and Sanquan Food

Assuming the 90 days trading horizon Dongfeng Automobile Co is expected to generate 1.67 times more return on investment than Sanquan Food. However, Dongfeng Automobile is 1.67 times more volatile than Sanquan Food Co. It trades about -0.16 of its potential returns per unit of risk. Sanquan Food Co is currently generating about -0.31 per unit of risk. If you would invest  783.00  in Dongfeng Automobile Co on October 12, 2024 and sell it today you would lose (100.00) from holding Dongfeng Automobile Co or give up 12.77% of portfolio value over 90 days.

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

Dongfeng Automobile Co  vs.  Sanquan Food Co

Dongfeng Automobile

Risk-Adjusted Performance

3 of 100

Insignificant

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

Sanquan Food

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Dongfeng Automobile and Sanquan Food

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

The idea behind Dongfeng Automobile Co and Sanquan Food 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.