Correlation Between CN DATANG and Makita

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

Diversification Opportunities for CN DATANG and Makita

-0.38

Correlation Coefficient

CN DATANG  Makita

Very good diversification

The 3 months correlation between DT7 and Makita is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding CN DATANG C and Makita in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Makita 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 Makita. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Makita has no effect on the direction of CN DATANG i.e., CN DATANG and Makita go up and down completely randomly.

Pair Corralation between CN DATANG and Makita

Assuming the 90 days trading horizon CN DATANG C is expected to generate 1.32 times more return on investment than Makita. However, CN DATANG is 1.32 times more volatile than Makita. It trades about 0.01 of its potential returns per unit of risk. Makita is currently generating about -0.29 per unit of risk. If you would invest  24.00  in CN DATANG C on October 9, 2024 and sell it today you would earn a total of  0.00  from holding CN DATANG C or generate 0.0% 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.  Makita

CN DATANG C

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CN DATANG C are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, CN DATANG unveiled solid returns over the last few months and may actually be approaching a breakup point.

Makita

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Makita 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 Makita

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

The idea behind CN DATANG C and Makita 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.