Correlation Between Dr Peng and RoadMain T

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

Diversification Opportunities for Dr Peng and RoadMain T

0.31

Correlation Coefficient

Dr Peng  RoadMain T

Weak diversification

The 3 months correlation between 600804 and RoadMain is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Dr Peng Telecom and RoadMain T Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RoadMain T 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 RoadMain T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RoadMain T has no effect on the direction of Dr Peng i.e., Dr Peng and RoadMain T go up and down completely randomly.

Pair Corralation between Dr Peng and RoadMain T

Assuming the 90 days trading horizon Dr Peng is expected to generate 3.36 times less return on investment than RoadMain T. In addition to that, Dr Peng is 1.44 times more volatile than RoadMain T Co. It trades about 0.01 of its total potential returns per unit of risk. RoadMain T Co is currently generating about 0.05 per unit of volatility. If you would invest  3,172  in RoadMain T Co on September 22, 2024 and sell it today you would earn a total of  68.00  from holding RoadMain T Co or generate 2.14% return on investment over 90 days.

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

Dr Peng Telecom  vs.  RoadMain T Co

Dr Peng Telecom

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dr Peng Telecom are ranked lower than 12 (%) 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.

RoadMain T

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RoadMain T Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, RoadMain T sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dr Peng and RoadMain T

The main advantage of trading using opposite Dr Peng and RoadMain T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dr Peng position performs unexpectedly, RoadMain T 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 RoadMain T will offset losses from the drop in RoadMain T's long position.

The idea behind Dr Peng Telecom and RoadMain T 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.