Correlation Between Dawning Information and Guangzhou Tinci

Can any of the company-specific risk be diversified away by investing in both Dawning Information and Guangzhou Tinci 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 Guangzhou Tinci 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 Guangzhou Tinci Materials, you can compare the effects of market volatilities on Dawning Information and Guangzhou Tinci 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 Guangzhou Tinci. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dawning Information and Guangzhou Tinci.

Diversification Opportunities for Dawning Information and Guangzhou Tinci

0.93

Correlation Coefficient

Dawning Information  Guangzhou Tinci

Almost no diversification

The 3 months correlation between Dawning and Guangzhou is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Dawning Information Industry and Guangzhou Tinci Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Tinci Materials 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 Guangzhou Tinci. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Tinci Materials has no effect on the direction of Dawning Information i.e., Dawning Information and Guangzhou Tinci go up and down completely randomly.

Pair Corralation between Dawning Information and Guangzhou Tinci

Assuming the 90 days trading horizon Dawning Information Industry is expected to generate 1.05 times more return on investment than Guangzhou Tinci. However, Dawning Information is 1.05 times more volatile than Guangzhou Tinci Materials. It trades about 0.19 of its potential returns per unit of risk. Guangzhou Tinci Materials is currently generating about 0.06 per unit of risk. If you would invest  4,772  in Dawning Information Industry on September 30, 2024 and sell it today you would earn a total of  2,712  from holding Dawning Information Industry or generate 56.83% return on investment over 90 days.

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

Dawning Information Industry  vs.  Guangzhou Tinci Materials

Dawning Information

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dawning Information Industry are ranked lower than 15 (%) 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.

Guangzhou Tinci Materials

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Tinci Materials are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Tinci sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dawning Information and Guangzhou Tinci

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

The idea behind Dawning Information Industry and Guangzhou Tinci Materials 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.