Correlation Between Dareway Software and China Eastern

Can any of the company-specific risk be diversified away by investing in both Dareway Software and China Eastern 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 Dareway Software and China Eastern into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dareway Software Co and China Eastern Airlines, you can compare the effects of market volatilities on Dareway Software and China Eastern 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 Dareway Software with a short position of China Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dareway Software and China Eastern.

Diversification Opportunities for Dareway Software and China Eastern

0.3

Correlation Coefficient

Dareway Software  China Eastern

Weak diversification

The 3 months correlation between Dareway and China is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Dareway Software Co and China Eastern Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Eastern Airlines and Dareway Software 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 Dareway Software Co are associated (or correlated) with China Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Eastern Airlines has no effect on the direction of Dareway Software i.e., Dareway Software and China Eastern go up and down completely randomly.

Pair Corralation between Dareway Software and China Eastern

Assuming the 90 days trading horizon Dareway Software Co is expected to generate 1.75 times more return on investment than China Eastern. However, Dareway Software is 1.75 times more volatile than China Eastern Airlines. It trades about 0.03 of its potential returns per unit of risk. China Eastern Airlines is currently generating about -0.06 per unit of risk. If you would invest  1,093  in Dareway Software Co on November 29, 2024 and sell it today you would earn a total of  39.00  from holding Dareway Software Co or generate 3.57% return on investment over 90 days.

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

Dareway Software Co  vs.  China Eastern Airlines

Dareway Software

Risk-Adjusted Performance

Weak

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

China Eastern Airlines

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Eastern Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Dareway Software and China Eastern

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

The idea behind Dareway Software Co and China Eastern Airlines 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.