Correlation Between CN DATANG and Carsales

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

Diversification Opportunities for CN DATANG and Carsales

0.16

Correlation Coefficient

CN DATANG  Carsales

Average diversification

The 3 months correlation between DT7 and Carsales is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding CN DATANG C and Carsales in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carsales 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carsales has no effect on the direction of CN DATANG i.e., CN DATANG and Carsales go up and down completely randomly.

Pair Corralation between CN DATANG and Carsales

Assuming the 90 days trading horizon CN DATANG C is expected to generate 2.43 times more return on investment than Carsales. However, CN DATANG is 2.43 times more volatile than Carsales. It trades about 0.06 of its potential returns per unit of risk. Carsales is currently generating about 0.04 per unit of risk. If you would invest  21.00  in CN DATANG C on October 4, 2024 and sell it today you would earn a total of  4.00  from holding CN DATANG C or generate 19.05% return on investment over 90 days.

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

CN DATANG C  vs.  Carsales

CN DATANG C

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CN DATANG C are ranked lower than 5 (%) 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.

Carsales

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carsales has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Carsales is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CN DATANG and Carsales

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

The idea behind CN DATANG C and Carsales 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.