Correlation Between Dongfeng and Xpeng

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

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

Diversification Opportunities for Dongfeng and Xpeng

0.45

Correlation Coefficient

Dongfeng  Xpeng

Very weak diversification

The 3 months correlation between Dongfeng and Xpeng is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Dongfeng Group and Xpeng Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xpeng Inc and Dongfeng 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 Dongfeng Group are associated (or correlated) with Xpeng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xpeng Inc has no effect on the direction of Dongfeng i.e., Dongfeng and Xpeng go up and down completely randomly.

Pair Corralation between Dongfeng and Xpeng

Assuming the 90 days horizon Dongfeng is expected to generate 1.69 times less return on investment than Xpeng. In addition to that, Dongfeng is 1.01 times more volatile than Xpeng Inc. It trades about 0.02 of its total potential returns per unit of risk. Xpeng Inc is currently generating about 0.03 per unit of volatility. If you would invest  988.00  in Xpeng Inc on September 19, 2024 and sell it today you would earn a total of  260.00  from holding Xpeng Inc or generate 26.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Dongfeng Group  vs.  Xpeng Inc

Dongfeng Group

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dongfeng Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Dongfeng reported solid returns over the last few months and may actually be approaching a breakup point.

Xpeng Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xpeng Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Xpeng showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dongfeng and Xpeng

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

The idea behind Dongfeng Group and Xpeng Inc 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.