Correlation Between Dr Peng and Xiamen Jihong

Can any of the company-specific risk be diversified away by investing in both Dr Peng and Xiamen Jihong 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 Dr Peng and Xiamen Jihong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dr Peng Telecom and Xiamen Jihong Package, you can compare the effects of market volatilities on Dr Peng and Xiamen Jihong 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 Dr Peng with a short position of Xiamen Jihong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dr Peng and Xiamen Jihong.

Diversification Opportunities for Dr Peng and Xiamen Jihong

0.78

Correlation Coefficient

Dr Peng  Xiamen Jihong

Poor diversification

The 3 months correlation between 600804 and Xiamen is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Dr Peng Telecom and Xiamen Jihong Package in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiamen Jihong Package and Dr Peng 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 Dr Peng Telecom are associated (or correlated) with Xiamen Jihong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiamen Jihong Package has no effect on the direction of Dr Peng i.e., Dr Peng and Xiamen Jihong go up and down completely randomly.

Pair Corralation between Dr Peng and Xiamen Jihong

Assuming the 90 days trading horizon Dr Peng Telecom is expected to under-perform the Xiamen Jihong. In addition to that, Dr Peng is 1.3 times more volatile than Xiamen Jihong Package. It trades about -0.05 of its total potential returns per unit of risk. Xiamen Jihong Package is currently generating about 0.05 per unit of volatility. If you would invest  1,525  in Xiamen Jihong Package on September 24, 2024 and sell it today you would earn a total of  34.00  from holding Xiamen Jihong Package or generate 2.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Dr Peng Telecom  vs.  Xiamen Jihong Package

Dr Peng Telecom

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dr Peng Telecom are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dr Peng sustained solid returns over the last few months and may actually be approaching a breakup point.

Xiamen Jihong Package

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xiamen Jihong Package are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiamen Jihong sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dr Peng and Xiamen Jihong

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

The idea behind Dr Peng Telecom and Xiamen Jihong Package 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..