Correlation Between Danaher and China New

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

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

Diversification Opportunities for Danaher and China New

-0.42

Correlation Coefficient

Danaher  China New

Very good diversification

The 3 months correlation between Danaher and China is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Danaher and China New Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China New Energy and Danaher 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 Danaher are associated (or correlated) with China New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China New Energy has no effect on the direction of Danaher i.e., Danaher and China New go up and down completely randomly.

Pair Corralation between Danaher and China New

Considering the 90-day investment horizon Danaher is expected to generate 0.09 times more return on investment than China New. However, Danaher is 11.12 times less risky than China New. It trades about 0.29 of its potential returns per unit of risk. China New Energy is currently generating about -0.17 per unit of risk. If you would invest  23,101  in Danaher on October 27, 2024 and sell it today you would earn a total of  1,479  from holding Danaher or generate 6.4% return on investment over 90 days.

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

Danaher  vs.  China New Energy

Danaher

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Danaher are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical indicators, Danaher is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

China New Energy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China New Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, China New reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Danaher and China New

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

The idea behind Danaher and China New Energy 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.