Correlation Between DATAGROUP and China DatangRenewable

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

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

Diversification Opportunities for DATAGROUP and China DatangRenewable

0.28

Correlation Coefficient

DATAGROUP  China DatangRenewable

Modest diversification

The 3 months correlation between DATAGROUP and China is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding DATAGROUP SE and China Datang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China DatangRenewable and DATAGROUP 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 DATAGROUP SE are associated (or correlated) with China DatangRenewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China DatangRenewable has no effect on the direction of DATAGROUP i.e., DATAGROUP and China DatangRenewable go up and down completely randomly.

Pair Corralation between DATAGROUP and China DatangRenewable

Assuming the 90 days trading horizon DATAGROUP SE is expected to generate 0.75 times more return on investment than China DatangRenewable. However, DATAGROUP SE is 1.34 times less risky than China DatangRenewable. It trades about 0.06 of its potential returns per unit of risk. China Datang is currently generating about 0.04 per unit of risk. If you would invest  4,370  in DATAGROUP SE on October 5, 2024 and sell it today you would earn a total of  310.00  from holding DATAGROUP SE or generate 7.09% return on investment over 90 days.

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

DATAGROUP SE  vs.  China Datang

DATAGROUP SE

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days DATAGROUP SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile technical indicators, DATAGROUP may actually be approaching a critical reversion point that can send shares even higher in February 2025.

China DatangRenewable

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days China Datang has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, China DatangRenewable may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with DATAGROUP and China DatangRenewable

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

The idea behind DATAGROUP SE and China Datang 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.