Correlation Between Dawning Information and Zhongtong Guomai

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

Diversification Opportunities for Dawning Information and Zhongtong Guomai

0.89

Correlation Coefficient

Dawning Information  Zhongtong Guomai

Very poor diversification

The 3 months correlation between Dawning and Zhongtong is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dawning Information Industry and Zhongtong Guomai Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongtong Guomai Com 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 Zhongtong Guomai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongtong Guomai Com has no effect on the direction of Dawning Information i.e., Dawning Information and Zhongtong Guomai go up and down completely randomly.

Pair Corralation between Dawning Information and Zhongtong Guomai

Assuming the 90 days trading horizon Dawning Information Industry is expected to generate 1.14 times more return on investment than Zhongtong Guomai. However, Dawning Information is 1.14 times more volatile than Zhongtong Guomai Communication. It trades about 0.31 of its potential returns per unit of risk. Zhongtong Guomai Communication is currently generating about 0.21 per unit of risk. If you would invest  3,597  in Dawning Information Industry on September 10, 2024 and sell it today you would earn a total of  4,102  from holding Dawning Information Industry or generate 114.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.31%
Values	Daily Returns

Dawning Information Industry  vs.  Zhongtong Guomai Communication

Dawning Information

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dawning Information Industry are ranked lower than 24 (%) 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.

Zhongtong Guomai Com

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongtong Guomai Communication are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongtong Guomai sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dawning Information and Zhongtong Guomai

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

The idea behind Dawning Information Industry and Zhongtong Guomai Communication 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.