Correlation Between DATANG INTL and MUTUIONLINE

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

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

Diversification Opportunities for DATANG INTL and MUTUIONLINE

-0.35

Correlation Coefficient

DATANG INTL  MUTUIONLINE

Very good diversification

The 3 months correlation between DATANG and MUTUIONLINE is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding DATANG INTL POW and MUTUIONLINE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MUTUIONLINE and DATANG INTL 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 INTL POW are associated (or correlated) with MUTUIONLINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MUTUIONLINE has no effect on the direction of DATANG INTL i.e., DATANG INTL and MUTUIONLINE go up and down completely randomly.

Pair Corralation between DATANG INTL and MUTUIONLINE

Assuming the 90 days trading horizon DATANG INTL POW is expected to generate 1.97 times more return on investment than MUTUIONLINE. However, DATANG INTL is 1.97 times more volatile than MUTUIONLINE. It trades about 0.04 of its potential returns per unit of risk. MUTUIONLINE is currently generating about 0.04 per unit of risk. If you would invest  12.00  in DATANG INTL POW on September 26, 2024 and sell it today you would earn a total of  5.00  from holding DATANG INTL POW or generate 41.67% return on investment over 90 days.

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

DATANG INTL POW  vs.  MUTUIONLINE

DATANG INTL POW

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DATANG INTL POW are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DATANG INTL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

MUTUIONLINE

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MUTUIONLINE are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain essential indicators, MUTUIONLINE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DATANG INTL and MUTUIONLINE

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

The idea behind DATANG INTL POW and MUTUIONLINE 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.