Correlation Between Dawning Information and Aerospace

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

By analyzing existing cross correlation between Dawning Information Industry and Aerospace Hi Tech Holding, you can compare the effects of market volatilities on Dawning Information and Aerospace 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 Dawning Information with a short position of Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dawning Information and Aerospace.

Diversification Opportunities for Dawning Information and Aerospace

0.5

Correlation Coefficient

Dawning Information  Aerospace

Very weak diversification

The 3 months correlation between Dawning and Aerospace is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Dawning Information Industry and Aerospace Hi Tech Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerospace Hi Tech and Dawning Information 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 Dawning Information Industry are associated (or correlated) with Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerospace Hi Tech has no effect on the direction of Dawning Information i.e., Dawning Information and Aerospace go up and down completely randomly.

Pair Corralation between Dawning Information and Aerospace

Assuming the 90 days trading horizon Dawning Information Industry is expected to generate 1.03 times more return on investment than Aerospace. However, Dawning Information is 1.03 times more volatile than Aerospace Hi Tech Holding. It trades about 0.1 of its potential returns per unit of risk. Aerospace Hi Tech Holding is currently generating about 0.04 per unit of risk. If you would invest  3,262  in Dawning Information Industry on October 9, 2024 and sell it today you would earn a total of  3,393  from holding Dawning Information Industry or generate 104.02% return on investment over 90 days.

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

Dawning Information Industry  vs.  Aerospace Hi Tech Holding

Dawning Information

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dawning Information Industry are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dawning Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Aerospace Hi Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aerospace Hi Tech Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Aerospace is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dawning Information and Aerospace

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

The idea behind Dawning Information Industry and Aerospace Hi Tech Holding 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..