Correlation Between Dongxing Sec and Changchun Faway

Can any of the company-specific risk be diversified away by investing in both Dongxing Sec and Changchun Faway 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 Dongxing Sec and Changchun Faway into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dongxing Sec Co and Changchun Faway Automobile, you can compare the effects of market volatilities on Dongxing Sec and Changchun Faway 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 Dongxing Sec with a short position of Changchun Faway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongxing Sec and Changchun Faway.

Diversification Opportunities for Dongxing Sec and Changchun Faway

0.75

Correlation Coefficient

Dongxing Sec  Changchun Faway

Poor diversification

The 3 months correlation between Dongxing and Changchun is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Dongxing Sec Co and Changchun Faway Automobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changchun Faway Auto and Dongxing Sec 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 Dongxing Sec Co are associated (or correlated) with Changchun Faway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changchun Faway Auto has no effect on the direction of Dongxing Sec i.e., Dongxing Sec and Changchun Faway go up and down completely randomly.

Pair Corralation between Dongxing Sec and Changchun Faway

Assuming the 90 days trading horizon Dongxing Sec Co is expected to generate 0.98 times more return on investment than Changchun Faway. However, Dongxing Sec Co is 1.02 times less risky than Changchun Faway. It trades about 0.05 of its potential returns per unit of risk. Changchun Faway Automobile is currently generating about 0.02 per unit of risk. If you would invest  791.00  in Dongxing Sec Co on September 29, 2024 and sell it today you would earn a total of  383.00  from holding Dongxing Sec Co or generate 48.42% return on investment over 90 days.

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

Dongxing Sec Co  vs.  Changchun Faway Automobile

Dongxing Sec

Risk-Adjusted Performance

3 of 100

Insignificant

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

Changchun Faway Auto

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Changchun Faway Automobile are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Changchun Faway is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dongxing Sec and Changchun Faway

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

The idea behind Dongxing Sec Co and Changchun Faway Automobile 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.