Correlation Between Dawushan Farm and Integrated Service

Can any of the company-specific risk be diversified away by investing in both Dawushan Farm and Integrated Service 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 Dawushan Farm and Integrated Service into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dawushan Farm Tech and Integrated Service Technology, you can compare the effects of market volatilities on Dawushan Farm and Integrated Service 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 Dawushan Farm with a short position of Integrated Service. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dawushan Farm and Integrated Service.

Diversification Opportunities for Dawushan Farm and Integrated Service

0.05

Correlation Coefficient

Dawushan Farm  Integrated Service

Significant diversification

The 3 months correlation between Dawushan and Integrated is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Dawushan Farm Tech and Integrated Service Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Integrated Service and Dawushan Farm 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 Dawushan Farm Tech are associated (or correlated) with Integrated Service. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Integrated Service has no effect on the direction of Dawushan Farm i.e., Dawushan Farm and Integrated Service go up and down completely randomly.

Pair Corralation between Dawushan Farm and Integrated Service

Assuming the 90 days trading horizon Dawushan Farm Tech is expected to generate 0.5 times more return on investment than Integrated Service. However, Dawushan Farm Tech is 1.99 times less risky than Integrated Service. It trades about -0.01 of its potential returns per unit of risk. Integrated Service Technology is currently generating about -0.1 per unit of risk. If you would invest  4,880  in Dawushan Farm Tech on December 25, 2024 and sell it today you would lose (35.00) from holding Dawushan Farm Tech or give up 0.72% of portfolio value over 90 days.

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

Dawushan Farm Tech  vs.  Integrated Service Technology

Dawushan Farm Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dawushan Farm Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Dawushan Farm is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Integrated Service

Risk-Adjusted Performance

Very Weak

Over the last 90 days Integrated Service Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Dawushan Farm and Integrated Service

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

The idea behind Dawushan Farm Tech and Integrated Service Technology 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.