Correlation Between Dongfeng Automobile and Advanced Micro

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

Diversification Opportunities for Dongfeng Automobile and Advanced Micro

0.45

Correlation Coefficient

Dongfeng Automobile  Advanced Micro

Very weak diversification

The 3 months correlation between Dongfeng and Advanced is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Dongfeng Automobile Co and Advanced Micro Fabrication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Micro Fabri 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 Advanced Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Micro Fabri has no effect on the direction of Dongfeng Automobile i.e., Dongfeng Automobile and Advanced Micro go up and down completely randomly.

Pair Corralation between Dongfeng Automobile and Advanced Micro

Assuming the 90 days trading horizon Dongfeng Automobile is expected to generate 1.71 times less return on investment than Advanced Micro. But when comparing it to its historical volatility, Dongfeng Automobile Co is 1.08 times less risky than Advanced Micro. It trades about 0.03 of its potential returns per unit of risk. Advanced Micro Fabrication is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  12,618  in Advanced Micro Fabrication on December 3, 2024 and sell it today you would earn a total of  7,809  from holding Advanced Micro Fabrication or generate 61.89% return on investment over 90 days.

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

Dongfeng Automobile Co  vs.  Advanced Micro Fabrication

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.

Advanced Micro Fabri

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advanced Micro Fabrication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Advanced Micro 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 Advanced Micro

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

The idea behind Dongfeng Automobile Co and Advanced Micro Fabrication 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 Stocks Directory module to find actively traded stocks across global markets.