Correlation Between Dongfeng Automobile and Sino Medical

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

Diversification Opportunities for Dongfeng Automobile and Sino Medical

0.46

Correlation Coefficient

Dongfeng Automobile  Sino Medical

Very weak diversification

The 3 months correlation between Dongfeng and Sino is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Dongfeng Automobile Co and Sino Medical Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sino Medical Sciences 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 Sino Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sino Medical Sciences has no effect on the direction of Dongfeng Automobile i.e., Dongfeng Automobile and Sino Medical go up and down completely randomly.

Pair Corralation between Dongfeng Automobile and Sino Medical

Assuming the 90 days trading horizon Dongfeng Automobile Co is expected to generate 1.0 times more return on investment than Sino Medical. However, Dongfeng Automobile Co is 1.0 times less risky than Sino Medical. It trades about 0.05 of its potential returns per unit of risk. Sino Medical Sciences is currently generating about -0.04 per unit of risk. If you would invest  659.00  in Dongfeng Automobile Co on October 10, 2024 and sell it today you would earn a total of  45.00  from holding Dongfeng Automobile Co or generate 6.83% 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.  Sino Medical Sciences

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.

Sino Medical Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sino Medical Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Dongfeng Automobile and Sino Medical

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

The idea behind Dongfeng Automobile Co and Sino Medical Sciences 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.