Correlation Between Dongfeng Automobile and China Publishing

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

Diversification Opportunities for Dongfeng Automobile and China Publishing

0.76

Correlation Coefficient

Dongfeng Automobile  China Publishing

Poor diversification

The 3 months correlation between Dongfeng and China is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Dongfeng Automobile Co and China Publishing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Publishing Media 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 China Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Publishing Media has no effect on the direction of Dongfeng Automobile i.e., Dongfeng Automobile and China Publishing go up and down completely randomly.

Pair Corralation between Dongfeng Automobile and China Publishing

Assuming the 90 days trading horizon Dongfeng Automobile Co is expected to generate 1.45 times more return on investment than China Publishing. However, Dongfeng Automobile is 1.45 times more volatile than China Publishing Media. It trades about -0.03 of its potential returns per unit of risk. China Publishing Media is currently generating about -0.29 per unit of risk. If you would invest  762.00  in Dongfeng Automobile Co on October 2, 2024 and sell it today you would lose (25.00) from holding Dongfeng Automobile Co or give up 3.28% of portfolio value over 90 days.

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

Dongfeng Automobile Co  vs.  China Publishing Media

Dongfeng Automobile

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dongfeng Automobile Co are ranked lower than 4 (%) 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 January 2025.

China Publishing Media

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Publishing Media are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, China Publishing 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 China Publishing

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

The idea behind Dongfeng Automobile Co and China Publishing Media 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.

Check out your portfolio center.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.