Correlation Between Datang International and INFORMATION SVC

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

Diversification Opportunities for Datang International and INFORMATION SVC

0.47

Correlation Coefficient

Datang International  INFORMATION SVC

Very weak diversification

The 3 months correlation between Datang and INFORMATION is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Datang International Power and INFORMATION SVC GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INFORMATION SVC GRP 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 INFORMATION SVC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INFORMATION SVC GRP has no effect on the direction of Datang International i.e., Datang International and INFORMATION SVC go up and down completely randomly.

Pair Corralation between Datang International and INFORMATION SVC

Assuming the 90 days horizon Datang International Power is expected to generate 1.52 times more return on investment than INFORMATION SVC. However, Datang International is 1.52 times more volatile than INFORMATION SVC GRP. It trades about 0.04 of its potential returns per unit of risk. INFORMATION SVC GRP is currently generating about 0.06 per unit of risk. If you would invest  17.00  in Datang International Power on December 31, 2024 and sell it today you would earn a total of  1.00  from holding Datang International Power or generate 5.88% return on investment over 90 days.

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

Datang International Power  vs.  INFORMATION SVC GRP

Datang International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Datang International Power are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Datang International may actually be approaching a critical reversion point that can send shares even higher in May 2025.

INFORMATION SVC GRP

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in INFORMATION SVC GRP are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, INFORMATION SVC may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with Datang International and INFORMATION SVC

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

The idea behind Datang International Power and INFORMATION SVC GRP 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.