Correlation Between Datang International and Science Applications

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

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

Diversification Opportunities for Datang International and Science Applications

0.53

Correlation Coefficient

Datang International  Science Applications

Very weak diversification

The 3 months correlation between Datang and Science is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Datang International Power and Science Applications Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Science Applications and Datang International 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 Datang International Power are associated (or correlated) with Science Applications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Science Applications has no effect on the direction of Datang International i.e., Datang International and Science Applications go up and down completely randomly.

Pair Corralation between Datang International and Science Applications

Assuming the 90 days horizon Datang International Power is expected to generate 0.71 times more return on investment than Science Applications. However, Datang International Power is 1.41 times less risky than Science Applications. It trades about -0.08 of its potential returns per unit of risk. Science Applications International is currently generating about -0.12 per unit of risk. If you would invest  17.00  in Datang International Power on September 1, 2024 and sell it today you would lose (1.00) from holding Datang International Power or give up 5.88% of portfolio value over 90 days.

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

Datang International Power  vs.  Science Applications Internati

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 basic indicators, Datang International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Science Applications

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Science Applications International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Science Applications is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Datang International and Science Applications

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

The idea behind Datang International Power and Science Applications International 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.