Correlation Between DATA MODUL and CN DATANG

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

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

Diversification Opportunities for DATA MODUL and CN DATANG

0.4

Correlation Coefficient

DATA MODUL  CN DATANG

Very weak diversification

The 3 months correlation between DATA and DT7 is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding DATA MODUL and CN DATANG C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CN DATANG C and DATA MODUL 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 DATA MODUL are associated (or correlated) with CN DATANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CN DATANG C has no effect on the direction of DATA MODUL i.e., DATA MODUL and CN DATANG go up and down completely randomly.

Pair Corralation between DATA MODUL and CN DATANG

Assuming the 90 days trading horizon DATA MODUL is expected to generate 1.01 times more return on investment than CN DATANG. However, DATA MODUL is 1.01 times more volatile than CN DATANG C. It trades about -0.04 of its potential returns per unit of risk. CN DATANG C is currently generating about -0.04 per unit of risk. If you would invest  2,760  in DATA MODUL on October 7, 2024 and sell it today you would lose (100.00) from holding DATA MODUL or give up 3.62% of portfolio value over 90 days.

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

DATA MODUL   vs.  CN DATANG C

DATA MODUL

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DATA MODUL are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, DATA MODUL is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

CN DATANG C

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CN DATANG C has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CN DATANG is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with DATA MODUL and CN DATANG

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

The idea behind DATA MODUL and CN DATANG C 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.