Correlation Between Dawning Information and Inspur Software

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

Diversification Opportunities for Dawning Information and Inspur Software

0.37

Correlation Coefficient

Dawning Information  Inspur Software

Weak diversification

The 3 months correlation between Dawning and Inspur is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Dawning Information Industry and Inspur Software Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspur Software 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 Inspur Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspur Software has no effect on the direction of Dawning Information i.e., Dawning Information and Inspur Software go up and down completely randomly.

Pair Corralation between Dawning Information and Inspur Software

Assuming the 90 days trading horizon Dawning Information Industry is expected to generate 1.15 times more return on investment than Inspur Software. However, Dawning Information is 1.15 times more volatile than Inspur Software Co. It trades about -0.18 of its potential returns per unit of risk. Inspur Software Co is currently generating about -0.36 per unit of risk. If you would invest  7,372  in Dawning Information Industry on October 12, 2024 and sell it today you would lose (798.00) from holding Dawning Information Industry or give up 10.82% of portfolio value over 90 days.

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

Dawning Information Industry  vs.  Inspur Software Co

Dawning Information

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dawning Information Industry are ranked lower than 8 (%) 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.

Inspur Software

Risk-Adjusted Performance

0 of 100

Weak

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

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

The idea behind Dawning Information Industry and Inspur Software Co 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.