Correlation Between CN DATANG and WisdomTree Investments

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Can any of the company-specific risk be diversified away by investing in both CN DATANG and WisdomTree Investments 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 CN DATANG and WisdomTree Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CN DATANG C and WisdomTree Investments, you can compare the effects of market volatilities on CN DATANG and WisdomTree Investments 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 CN DATANG with a short position of WisdomTree Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of CN DATANG and WisdomTree Investments.

Diversification Opportunities for CN DATANG and WisdomTree Investments

0.03
  Correlation Coefficient

Significant diversification

The 3 months correlation between DT7 and WisdomTree is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding CN DATANG C and WisdomTree Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Investments and CN DATANG 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 CN DATANG C are associated (or correlated) with WisdomTree Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Investments has no effect on the direction of CN DATANG i.e., CN DATANG and WisdomTree Investments go up and down completely randomly.

Pair Corralation between CN DATANG and WisdomTree Investments

Assuming the 90 days trading horizon CN DATANG C is expected to generate 1.03 times more return on investment than WisdomTree Investments. However, CN DATANG is 1.03 times more volatile than WisdomTree Investments. It trades about 0.04 of its potential returns per unit of risk. WisdomTree Investments is currently generating about 0.01 per unit of risk. If you would invest  23.00  in CN DATANG C on October 24, 2024 and sell it today you would earn a total of  1.00  from holding CN DATANG C or generate 4.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

CN DATANG C  vs.  WisdomTree Investments

 Performance 
       Timeline  
CN DATANG C 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in CN DATANG C are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CN DATANG may actually be approaching a critical reversion point that can send shares even higher in February 2025.
WisdomTree Investments 

Risk-Adjusted Performance

0 of 100

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

CN DATANG and WisdomTree Investments Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CN DATANG and WisdomTree Investments

The main advantage of trading using opposite CN DATANG and WisdomTree Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CN DATANG position performs unexpectedly, WisdomTree Investments 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 WisdomTree Investments will offset losses from the drop in WisdomTree Investments' long position.
The idea behind CN DATANG C and WisdomTree Investments 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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