Correlation Between Arcosa and DONGJIANG ENVIRONMENTAL

Can any of the company-specific risk be diversified away by investing in both Arcosa and DONGJIANG ENVIRONMENTAL 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 Arcosa and DONGJIANG ENVIRONMENTAL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Arcosa Inc and DONGJIANG ENVIRONMENTAL H, you can compare the effects of market volatilities on Arcosa and DONGJIANG ENVIRONMENTAL 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 Arcosa with a short position of DONGJIANG ENVIRONMENTAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arcosa and DONGJIANG ENVIRONMENTAL.

Diversification Opportunities for Arcosa and DONGJIANG ENVIRONMENTAL

0.16

Correlation Coefficient

Arcosa  DONGJIANG ENVIRONMENTAL

Average diversification

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

Pair Corralation between Arcosa and DONGJIANG ENVIRONMENTAL

Assuming the 90 days horizon Arcosa Inc is expected to generate 0.43 times more return on investment than DONGJIANG ENVIRONMENTAL. However, Arcosa Inc is 2.31 times less risky than DONGJIANG ENVIRONMENTAL. It trades about 0.07 of its potential returns per unit of risk. DONGJIANG ENVIRONMENTAL H is currently generating about 0.01 per unit of risk. If you would invest  5,075  in Arcosa Inc on October 11, 2024 and sell it today you would earn a total of  4,075  from holding Arcosa Inc or generate 80.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Arcosa Inc  vs.  DONGJIANG ENVIRONMENTAL H

Arcosa Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arcosa Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Arcosa may actually be approaching a critical reversion point that can send shares even higher in February 2025.

DONGJIANG ENVIRONMENTAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DONGJIANG ENVIRONMENTAL H has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, DONGJIANG ENVIRONMENTAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Arcosa and DONGJIANG ENVIRONMENTAL

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

The idea behind Arcosa Inc and DONGJIANG ENVIRONMENTAL H 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.