Correlation Between Long Giang and Danang Education

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

By analyzing existing cross correlation between Long Giang Investment and Danang Education Investment, you can compare the effects of market volatilities on Long Giang and Danang Education 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 Long Giang with a short position of Danang Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Long Giang and Danang Education.

Diversification Opportunities for Long Giang and Danang Education

0.08

Correlation Coefficient

Long Giang  Danang Education

Significant diversification

The 3 months correlation between Long and Danang is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Long Giang Investment and Danang Education Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danang Education Inv and Long Giang 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 Long Giang Investment are associated (or correlated) with Danang Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danang Education Inv has no effect on the direction of Long Giang i.e., Long Giang and Danang Education go up and down completely randomly.

Pair Corralation between Long Giang and Danang Education

Assuming the 90 days trading horizon Long Giang is expected to generate 1.47 times less return on investment than Danang Education. But when comparing it to its historical volatility, Long Giang Investment is 2.62 times less risky than Danang Education. It trades about 0.13 of its potential returns per unit of risk. Danang Education Investment is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,000,000  in Danang Education Investment on October 5, 2024 and sell it today you would earn a total of  100,000  from holding Danang Education Investment or generate 5.0% return on investment over 90 days.

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

Long Giang Investment  vs.  Danang Education Investment

Long Giang Investment

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Long Giang Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Long Giang is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Danang Education Inv

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Danang Education Investment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Danang Education displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Long Giang and Danang Education

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

The idea behind Long Giang Investment and Danang Education Investment 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.