Correlation Between CN DATANG and CapitaLand Investment

Can any of the company-specific risk be diversified away by investing in both CN DATANG and CapitaLand Investment 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 CapitaLand Investment 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 CapitaLand Investment Limited, you can compare the effects of market volatilities on CN DATANG and CapitaLand Investment 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 CapitaLand Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of CN DATANG and CapitaLand Investment.

Diversification Opportunities for CN DATANG and CapitaLand Investment

-0.7

Correlation Coefficient

CN DATANG  CapitaLand Investment

Excellent diversification

The 3 months correlation between DT7 and CapitaLand is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding CN DATANG C and CapitaLand Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CapitaLand Investment 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 CapitaLand Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CapitaLand Investment has no effect on the direction of CN DATANG i.e., CN DATANG and CapitaLand Investment go up and down completely randomly.

Pair Corralation between CN DATANG and CapitaLand Investment

Assuming the 90 days trading horizon CN DATANG C is expected to generate 3.21 times more return on investment than CapitaLand Investment. However, CN DATANG is 3.21 times more volatile than CapitaLand Investment Limited. It trades about 0.09 of its potential returns per unit of risk. CapitaLand Investment Limited is currently generating about 0.0 per unit of risk. If you would invest  11.00  in CN DATANG C on October 7, 2024 and sell it today you would earn a total of  13.00  from holding CN DATANG C or generate 118.18% return on investment over 90 days.

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

CN DATANG C  vs.  CapitaLand Investment Limited

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

CapitaLand Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CapitaLand Investment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CN DATANG and CapitaLand Investment

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

The idea behind CN DATANG C and CapitaLand Investment Limited 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 Anywhere module to track or share privately all of your investments from the convenience of any device.