Correlation Between Applied Blockchain and Dongfeng

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

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

Diversification Opportunities for Applied Blockchain and Dongfeng

0.78

Correlation Coefficient

Applied Blockchain  Dongfeng

Poor diversification

The 3 months correlation between Applied and Dongfeng is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Applied Blockchain and Dongfeng Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongfeng Group and Applied Blockchain 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 Applied Blockchain are associated (or correlated) with Dongfeng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongfeng Group has no effect on the direction of Applied Blockchain i.e., Applied Blockchain and Dongfeng go up and down completely randomly.

Pair Corralation between Applied Blockchain and Dongfeng

Given the investment horizon of 90 days Applied Blockchain is expected to generate 1.69 times more return on investment than Dongfeng. However, Applied Blockchain is 1.69 times more volatile than Dongfeng Group. It trades about 0.08 of its potential returns per unit of risk. Dongfeng Group is currently generating about 0.02 per unit of risk. If you would invest  188.00  in Applied Blockchain on September 19, 2024 and sell it today you would earn a total of  806.00  from holding Applied Blockchain or generate 428.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Applied Blockchain  vs.  Dongfeng Group

Applied Blockchain

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Blockchain are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting essential indicators, Applied Blockchain exhibited solid returns over the last few months and may actually be approaching a breakup point.

Dongfeng Group

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dongfeng Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Dongfeng reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Applied Blockchain and Dongfeng

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

The idea behind Applied Blockchain and Dongfeng Group 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.