Correlation Between Northern Data and CN DATANG

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

By analyzing existing cross correlation between Northern Data AG and CN DATANG C, you can compare the effects of market volatilities on Northern Data and CN DATANG 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 Northern Data with a short position of CN DATANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Data and CN DATANG.

Diversification Opportunities for Northern Data and CN DATANG

0.51

Correlation Coefficient

Northern Data  CN DATANG

Very weak diversification

The 3 months correlation between Northern and DT7 is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Northern Data AG and CN DATANG C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CN DATANG C and Northern Data 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 Northern Data AG are associated (or correlated) with CN DATANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CN DATANG C has no effect on the direction of Northern Data i.e., Northern Data and CN DATANG go up and down completely randomly.

Pair Corralation between Northern Data and CN DATANG

Assuming the 90 days trading horizon Northern Data AG is expected to generate 1.37 times more return on investment than CN DATANG. However, Northern Data is 1.37 times more volatile than CN DATANG C. It trades about 0.23 of its potential returns per unit of risk. CN DATANG C is currently generating about 0.04 per unit of risk. If you would invest  2,905  in Northern Data AG on October 27, 2024 and sell it today you would earn a total of  1,795  from holding Northern Data AG or generate 61.79% return on investment over 90 days.

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

Northern Data AG  vs.  CN DATANG C

Northern Data AG

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Data AG are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Northern Data unveiled solid returns over the last few months and may actually be approaching a breakup point.

CN DATANG C

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CN DATANG C are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CN DATANG may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Northern Data and CN DATANG

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

The idea behind Northern Data AG and CN DATANG C 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.