Correlation Between ACM Research and Dongfeng Automobile

Can any of the company-specific risk be diversified away by investing in both ACM Research and Dongfeng Automobile 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 ACM Research and Dongfeng Automobile into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ACM Research Shanghai and Dongfeng Automobile Co, you can compare the effects of market volatilities on ACM Research and Dongfeng Automobile 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 ACM Research with a short position of Dongfeng Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of ACM Research and Dongfeng Automobile.

Diversification Opportunities for ACM Research and Dongfeng Automobile

0.23

Correlation Coefficient

ACM Research  Dongfeng Automobile

Modest diversification

The 3 months correlation between ACM and Dongfeng is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding ACM Research Shanghai and Dongfeng Automobile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongfeng Automobile and ACM Research 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 ACM Research Shanghai are associated (or correlated) with Dongfeng Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongfeng Automobile has no effect on the direction of ACM Research i.e., ACM Research and Dongfeng Automobile go up and down completely randomly.

Pair Corralation between ACM Research and Dongfeng Automobile

Assuming the 90 days trading horizon ACM Research Shanghai is expected to under-perform the Dongfeng Automobile. But the stock apears to be less risky and, when comparing its historical volatility, ACM Research Shanghai is 1.09 times less risky than Dongfeng Automobile. The stock trades about -0.01 of its potential returns per unit of risk. The Dongfeng Automobile Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  562.00  in Dongfeng Automobile Co on October 5, 2024 and sell it today you would earn a total of  128.00  from holding Dongfeng Automobile Co or generate 22.78% return on investment over 90 days.

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

ACM Research Shanghai  vs.  Dongfeng Automobile Co

ACM Research Shanghai

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ACM Research Shanghai 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Dongfeng Automobile

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dongfeng Automobile Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongfeng Automobile may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ACM Research and Dongfeng Automobile

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

The idea behind ACM Research Shanghai and Dongfeng Automobile 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.