Correlation Between Dalian Thermal and Shenzhen Dynanonic

Can any of the company-specific risk be diversified away by investing in both Dalian Thermal and Shenzhen Dynanonic 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 Dalian Thermal and Shenzhen Dynanonic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dalian Thermal Power and Shenzhen Dynanonic Co, you can compare the effects of market volatilities on Dalian Thermal and Shenzhen Dynanonic 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 Dalian Thermal with a short position of Shenzhen Dynanonic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dalian Thermal and Shenzhen Dynanonic.

Diversification Opportunities for Dalian Thermal and Shenzhen Dynanonic

0.71

Correlation Coefficient

Dalian Thermal  Shenzhen Dynanonic

Poor diversification

The 3 months correlation between Dalian and Shenzhen is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Dalian Thermal Power and Shenzhen Dynanonic Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Dynanonic and Dalian Thermal 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 Dalian Thermal Power are associated (or correlated) with Shenzhen Dynanonic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Dynanonic has no effect on the direction of Dalian Thermal i.e., Dalian Thermal and Shenzhen Dynanonic go up and down completely randomly.

Pair Corralation between Dalian Thermal and Shenzhen Dynanonic

Assuming the 90 days trading horizon Dalian Thermal Power is expected to under-perform the Shenzhen Dynanonic. But the stock apears to be less risky and, when comparing its historical volatility, Dalian Thermal Power is 1.01 times less risky than Shenzhen Dynanonic. The stock trades about -0.12 of its potential returns per unit of risk. The Shenzhen Dynanonic Co is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  4,285  in Shenzhen Dynanonic Co on September 27, 2024 and sell it today you would lose (265.00) from holding Shenzhen Dynanonic Co or give up 6.18% of portfolio value over 90 days.

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

Dalian Thermal Power  vs.  Shenzhen Dynanonic Co

Dalian Thermal Power

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dalian Thermal Power are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dalian Thermal sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Dynanonic

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Dynanonic Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Dynanonic sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dalian Thermal and Shenzhen Dynanonic

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

The idea behind Dalian Thermal Power and Shenzhen Dynanonic 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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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..