Correlation Between Dazhong Transportation and Sichuan Newsnet

Can any of the company-specific risk be diversified away by investing in both Dazhong Transportation and Sichuan Newsnet 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 Dazhong Transportation and Sichuan Newsnet into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dazhong Transportation Group and Sichuan Newsnet Media, you can compare the effects of market volatilities on Dazhong Transportation and Sichuan Newsnet 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 Dazhong Transportation with a short position of Sichuan Newsnet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dazhong Transportation and Sichuan Newsnet.

Diversification Opportunities for Dazhong Transportation and Sichuan Newsnet

0.92

Correlation Coefficient

Dazhong Transportation  Sichuan Newsnet

Almost no diversification

The 3 months correlation between Dazhong and Sichuan is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Dazhong Transportation Group and Sichuan Newsnet Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Newsnet Media and Dazhong Transportation 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 Dazhong Transportation Group are associated (or correlated) with Sichuan Newsnet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Newsnet Media has no effect on the direction of Dazhong Transportation i.e., Dazhong Transportation and Sichuan Newsnet go up and down completely randomly.

Pair Corralation between Dazhong Transportation and Sichuan Newsnet

Assuming the 90 days trading horizon Dazhong Transportation is expected to generate 1.32 times less return on investment than Sichuan Newsnet. But when comparing it to its historical volatility, Dazhong Transportation Group is 1.69 times less risky than Sichuan Newsnet. It trades about 0.18 of its potential returns per unit of risk. Sichuan Newsnet Media is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,192  in Sichuan Newsnet Media on September 23, 2024 and sell it today you would earn a total of  484.00  from holding Sichuan Newsnet Media or generate 40.6% return on investment over 90 days.

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

Dazhong Transportation Group  vs.  Sichuan Newsnet Media

Dazhong Transportation

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dazhong Transportation Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dazhong Transportation sustained solid returns over the last few months and may actually be approaching a breakup point.

Sichuan Newsnet Media

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Newsnet Media are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Newsnet sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dazhong Transportation and Sichuan Newsnet

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

The idea behind Dazhong Transportation Group and Sichuan Newsnet Media 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.