Correlation Between Panda Financial and Chongqing VDL

Can any of the company-specific risk be diversified away by investing in both Panda Financial and Chongqing VDL 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 Panda Financial and Chongqing VDL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Panda Financial Holding and Chongqing VDL Electronics, you can compare the effects of market volatilities on Panda Financial and Chongqing VDL 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 Panda Financial with a short position of Chongqing VDL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Panda Financial and Chongqing VDL.

Diversification Opportunities for Panda Financial and Chongqing VDL

0.57

Correlation Coefficient

Panda Financial  Chongqing VDL

Very weak diversification

The 3 months correlation between Panda and Chongqing is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Panda Financial Holding and Chongqing VDL Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing VDL Electronics and Panda Financial 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 Panda Financial Holding are associated (or correlated) with Chongqing VDL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing VDL Electronics has no effect on the direction of Panda Financial i.e., Panda Financial and Chongqing VDL go up and down completely randomly.

Pair Corralation between Panda Financial and Chongqing VDL

Assuming the 90 days trading horizon Panda Financial Holding is expected to under-perform the Chongqing VDL. But the stock apears to be less risky and, when comparing its historical volatility, Panda Financial Holding is 1.02 times less risky than Chongqing VDL. The stock trades about -0.24 of its potential returns per unit of risk. The Chongqing VDL Electronics is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,975  in Chongqing VDL Electronics on October 8, 2024 and sell it today you would earn a total of  125.00  from holding Chongqing VDL Electronics or generate 2.51% return on investment over 90 days.

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

Panda Financial Holding  vs.  Chongqing VDL Electronics

Panda Financial Holding

Risk-Adjusted Performance

3 of 100

Insignificant

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

Chongqing VDL Electronics

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Panda Financial and Chongqing VDL

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

The idea behind Panda Financial Holding and Chongqing VDL Electronics 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.