Correlation Between Dazhong Transportation and APT Medical

Can any of the company-specific risk be diversified away by investing in both Dazhong Transportation and APT Medical 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 APT Medical 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 APT Medical, you can compare the effects of market volatilities on Dazhong Transportation and APT Medical 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 APT Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dazhong Transportation and APT Medical.

Diversification Opportunities for Dazhong Transportation and APT Medical

0.32

Correlation Coefficient

Dazhong Transportation  APT Medical

Weak diversification

The 3 months correlation between Dazhong and APT is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Dazhong Transportation Group and APT Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APT Medical 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 APT Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APT Medical has no effect on the direction of Dazhong Transportation i.e., Dazhong Transportation and APT Medical go up and down completely randomly.

Pair Corralation between Dazhong Transportation and APT Medical

Assuming the 90 days trading horizon Dazhong Transportation Group is expected to under-perform the APT Medical. But the stock apears to be less risky and, when comparing its historical volatility, Dazhong Transportation Group is 1.41 times less risky than APT Medical. The stock trades about -0.39 of its potential returns per unit of risk. The APT Medical is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  35,200  in APT Medical on September 25, 2024 and sell it today you would earn a total of  562.00  from holding APT Medical or generate 1.6% return on investment over 90 days.

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

Dazhong Transportation Group  vs.  APT Medical

Dazhong Transportation

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dazhong Transportation Group are ranked lower than 9 (%) 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.

APT Medical

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in APT Medical are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, APT Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dazhong Transportation and APT Medical

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

The idea behind Dazhong Transportation Group and APT Medical 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.