Correlation Between Dalian Thermal and Industrial

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

Diversification Opportunities for Dalian Thermal and Industrial

0.09

Correlation Coefficient

Dalian Thermal  Industrial

Significant diversification

The 3 months correlation between Dalian and Industrial is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Dalian Thermal Power and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial 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 Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of Dalian Thermal i.e., Dalian Thermal and Industrial go up and down completely randomly.

Pair Corralation between Dalian Thermal and Industrial

Assuming the 90 days trading horizon Dalian Thermal Power is expected to under-perform the Industrial. In addition to that, Dalian Thermal is 2.82 times more volatile than Industrial and Commercial. It trades about -0.12 of its total potential returns per unit of risk. Industrial and Commercial is currently generating about 0.43 per unit of volatility. If you would invest  619.00  in Industrial and Commercial on September 29, 2024 and sell it today you would earn a total of  73.00  from holding Industrial and Commercial or generate 11.79% return on investment over 90 days.

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

Dalian Thermal Power  vs.  Industrial and Commercial

Dalian Thermal Power

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dalian Thermal Power are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dalian Thermal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Industrial and Commercial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dalian Thermal and Industrial

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

The idea behind Dalian Thermal Power and Industrial and Commercial 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.