Correlation Between Ping An and DO Home

Can any of the company-specific risk be diversified away by investing in both Ping An and DO Home 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 Ping An and DO Home into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ping An Insurance and DO Home Collection, you can compare the effects of market volatilities on Ping An and DO Home 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 Ping An with a short position of DO Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and DO Home.

Diversification Opportunities for Ping An and DO Home

0.75

Correlation Coefficient

Ping An  DO Home

Poor diversification

The 3 months correlation between Ping and 002798 is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and DO Home Collection in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DO Home Collection and Ping An 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 Ping An Insurance are associated (or correlated) with DO Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DO Home Collection has no effect on the direction of Ping An i.e., Ping An and DO Home go up and down completely randomly.

Pair Corralation between Ping An and DO Home

Assuming the 90 days trading horizon Ping An Insurance is expected to generate 0.61 times more return on investment than DO Home. However, Ping An Insurance is 1.65 times less risky than DO Home. It trades about 0.04 of its potential returns per unit of risk. DO Home Collection is currently generating about -0.02 per unit of risk. If you would invest  4,426  in Ping An Insurance on September 13, 2024 and sell it today you would earn a total of  1,132  from holding Ping An Insurance or generate 25.58% return on investment over 90 days.

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

Ping An Insurance  vs.  DO Home Collection

Ping An Insurance

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ping An Insurance are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ping An sustained solid returns over the last few months and may actually be approaching a breakup point.

DO Home Collection

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DO Home Collection are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DO Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ping An and DO Home

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

The idea behind Ping An Insurance and DO Home Collection 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.