Correlation Between CN DATANG and Seiko Epson

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

Diversification Opportunities for CN DATANG and Seiko Epson

-0.43

Correlation Coefficient

CN DATANG  Seiko Epson

Very good diversification

The 3 months correlation between DT7 and Seiko is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding CN DATANG C and Seiko Epson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seiko Epson 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 Seiko Epson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seiko Epson has no effect on the direction of CN DATANG i.e., CN DATANG and Seiko Epson go up and down completely randomly.

Pair Corralation between CN DATANG and Seiko Epson

Assuming the 90 days trading horizon CN DATANG C is expected to generate 1.71 times more return on investment than Seiko Epson. However, CN DATANG is 1.71 times more volatile than Seiko Epson. It trades about 0.02 of its potential returns per unit of risk. Seiko Epson is currently generating about -0.07 per unit of risk. If you would invest  25.00  in CN DATANG C on December 19, 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	Very Weak
Accuracy	98.33%
Values	Daily Returns

CN DATANG C  vs.  Seiko Epson

CN DATANG C

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CN DATANG C are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Seiko Epson

Risk-Adjusted Performance

Very Weak

Over the last 90 days Seiko Epson 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 Seiko Epson

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

The idea behind CN DATANG C and Seiko Epson 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.