Correlation Between China DatangRenewable and PPG Industries

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

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

Diversification Opportunities for China DatangRenewable and PPG Industries

-0.11

Correlation Coefficient

China DatangRenewable  PPG Industries

Good diversification

The 3 months correlation between China and PPG is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding China Datang and PPG Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPG Industries and China DatangRenewable 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 China Datang are associated (or correlated) with PPG Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPG Industries has no effect on the direction of China DatangRenewable i.e., China DatangRenewable and PPG Industries go up and down completely randomly.

Pair Corralation between China DatangRenewable and PPG Industries

Assuming the 90 days horizon China Datang is expected to generate 3.31 times more return on investment than PPG Industries. However, China DatangRenewable is 3.31 times more volatile than PPG Industries. It trades about 0.04 of its potential returns per unit of risk. PPG Industries is currently generating about 0.0 per unit of risk. If you would invest  15.00  in China Datang on October 5, 2024 and sell it today you would earn a total of  10.00  from holding China Datang or generate 66.67% return on investment over 90 days.

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

China Datang  vs.  PPG Industries

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.

PPG Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PPG Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PPG Industries is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with China DatangRenewable and PPG Industries

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

The idea behind China Datang and PPG Industries 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.