Correlation Between AGL Energy and Datang International

Can any of the company-specific risk be diversified away by investing in both AGL Energy and Datang International 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 AGL Energy and Datang International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AGL Energy and Datang International Power, you can compare the effects of market volatilities on AGL Energy and Datang International 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 AGL Energy with a short position of Datang International. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGL Energy and Datang International.

Diversification Opportunities for AGL Energy and Datang International

-0.64

Correlation Coefficient

AGL Energy  Datang International

Excellent diversification

The 3 months correlation between AGL and Datang is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding AGL Energy and Datang International Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datang International and AGL Energy 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 AGL Energy are associated (or correlated) with Datang International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datang International has no effect on the direction of AGL Energy i.e., AGL Energy and Datang International go up and down completely randomly.

Pair Corralation between AGL Energy and Datang International

If you would invest  693.00  in AGL Energy on September 10, 2024 and sell it today you would earn a total of  7.00  from holding AGL Energy or generate 1.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	5.0%
Values	Daily Returns

AGL Energy  vs.  Datang International Power

AGL Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AGL Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, AGL Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Datang International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Datang International Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Datang International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AGL Energy and Datang International

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

The idea behind AGL Energy and Datang International Power 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.