Correlation Between CN DATANG and Albemarle

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

Diversification Opportunities for CN DATANG and Albemarle

-0.13

Correlation Coefficient

CN DATANG  Albemarle

Good diversification

The 3 months correlation between DT7 and Albemarle is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding CN DATANG C and Albemarle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albemarle 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 Albemarle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albemarle has no effect on the direction of CN DATANG i.e., CN DATANG and Albemarle go up and down completely randomly.

Pair Corralation between CN DATANG and Albemarle

Assuming the 90 days trading horizon CN DATANG C is expected to generate 1.25 times more return on investment than Albemarle. However, CN DATANG is 1.25 times more volatile than Albemarle. It trades about 0.05 of its potential returns per unit of risk. Albemarle is currently generating about -0.04 per unit of risk. If you would invest  14.00  in CN DATANG C on October 25, 2024 and sell it today you would earn a total of  10.00  from holding CN DATANG C or generate 71.43% return on investment over 90 days.

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

CN DATANG C  vs.  Albemarle

CN DATANG C

Risk-Adjusted Performance

3 of 100

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 unsteady basic indicators, CN DATANG may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Albemarle

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Albemarle are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Albemarle is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CN DATANG and Albemarle

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

The idea behind CN DATANG C and Albemarle 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.

Check out your portfolio center.

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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.