Correlation Between Duzhe Publishing and Wuxi Xuelang

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

By analyzing existing cross correlation between Duzhe Publishing Media and Wuxi Xuelang Environmental, you can compare the effects of market volatilities on Duzhe Publishing and Wuxi Xuelang 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 Duzhe Publishing with a short position of Wuxi Xuelang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Duzhe Publishing and Wuxi Xuelang.

Diversification Opportunities for Duzhe Publishing and Wuxi Xuelang

0.9

Correlation Coefficient

Duzhe Publishing  Wuxi Xuelang

Almost no diversification

The 3 months correlation between Duzhe and Wuxi is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Duzhe Publishing Media and Wuxi Xuelang Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wuxi Xuelang Environ and Duzhe Publishing 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 Duzhe Publishing Media are associated (or correlated) with Wuxi Xuelang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wuxi Xuelang Environ has no effect on the direction of Duzhe Publishing i.e., Duzhe Publishing and Wuxi Xuelang go up and down completely randomly.

Pair Corralation between Duzhe Publishing and Wuxi Xuelang

Assuming the 90 days trading horizon Duzhe Publishing is expected to generate 3.78 times less return on investment than Wuxi Xuelang. But when comparing it to its historical volatility, Duzhe Publishing Media is 1.08 times less risky than Wuxi Xuelang. It trades about 0.01 of its potential returns per unit of risk. Wuxi Xuelang Environmental is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  491.00  in Wuxi Xuelang Environmental on December 24, 2024 and sell it today you would earn a total of  16.00  from holding Wuxi Xuelang Environmental or generate 3.26% return on investment over 90 days.

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

Duzhe Publishing Media  vs.  Wuxi Xuelang Environmental

Duzhe Publishing Media

Risk-Adjusted Performance

Very Weak

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

Wuxi Xuelang Environ

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wuxi Xuelang Environmental are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Wuxi Xuelang is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Duzhe Publishing and Wuxi Xuelang

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

The idea behind Duzhe Publishing Media and Wuxi Xuelang Environmental 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.