Correlation Between Dongfeng Automobile and Eastern Communications
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By analyzing existing cross correlation between Dongfeng Automobile Co and Eastern Communications Co, you can compare the effects of market volatilities on Dongfeng Automobile and Eastern Communications 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 Eastern Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongfeng Automobile and Eastern Communications.
Diversification Opportunities for Dongfeng Automobile and Eastern Communications
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dongfeng and Eastern is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Dongfeng Automobile Co and Eastern Communications Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Communications 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 Eastern Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Communications has no effect on the direction of Dongfeng Automobile i.e., Dongfeng Automobile and Eastern Communications go up and down completely randomly.
Pair Corralation between Dongfeng Automobile and Eastern Communications
Assuming the 90 days trading horizon Dongfeng Automobile Co is expected to under-perform the Eastern Communications. In addition to that, Dongfeng Automobile is 1.19 times more volatile than Eastern Communications Co. It trades about -0.02 of its total potential returns per unit of risk. Eastern Communications Co is currently generating about 0.01 per unit of volatility. If you would invest 41.00 in Eastern Communications Co on September 25, 2024 and sell it today you would earn a total of 0.00 from holding Eastern Communications Co or generate 0.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Dongfeng Automobile Co vs. Eastern Communications Co
Performance |
Timeline |
Dongfeng Automobile |
Eastern Communications |
Dongfeng Automobile and Eastern Communications Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Dongfeng Automobile and Eastern Communications
The main advantage of trading using opposite Dongfeng Automobile and Eastern Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongfeng Automobile position performs unexpectedly, Eastern Communications 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 Eastern Communications will offset losses from the drop in Eastern Communications' long position.The idea behind Dongfeng Automobile Co and Eastern Communications 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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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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