Correlation Between Dawning Information and China Sports

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

Diversification Opportunities for Dawning Information and China Sports

0.48

Correlation Coefficient

Dawning Information  China Sports

Very weak diversification

The 3 months correlation between Dawning and China is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Dawning Information Industry and China Sports Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Sports Industry 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 China Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Sports Industry has no effect on the direction of Dawning Information i.e., Dawning Information and China Sports go up and down completely randomly.

Pair Corralation between Dawning Information and China Sports

Assuming the 90 days trading horizon Dawning Information Industry is expected to under-perform the China Sports. In addition to that, Dawning Information is 1.69 times more volatile than China Sports Industry. It trades about -0.1 of its total potential returns per unit of risk. China Sports Industry is currently generating about -0.03 per unit of volatility. If you would invest  866.00  in China Sports Industry on December 26, 2024 and sell it today you would lose (34.00) from holding China Sports Industry or give up 3.93% of portfolio value over 90 days.

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

Dawning Information Industry  vs.  China Sports Industry

Dawning Information

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dawning Information Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

China Sports Industry

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Sports Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Sports 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 China Sports

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

The idea behind Dawning Information Industry and China Sports Industry 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.