Correlation Between Stag Industrial and China Datang

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

By analyzing existing cross correlation between Stag Industrial and China Datang, you can compare the effects of market volatilities on Stag Industrial and China 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 Stag Industrial with a short position of China Datang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stag Industrial and China Datang.

Diversification Opportunities for Stag Industrial and China Datang

-0.52

Correlation Coefficient

Stag Industrial  China Datang

Excellent diversification

The 3 months correlation between Stag and China is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Stag Industrial and China Datang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Datang and Stag Industrial 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 Stag Industrial are associated (or correlated) with China Datang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Datang has no effect on the direction of Stag Industrial i.e., Stag Industrial and China Datang go up and down completely randomly.

Pair Corralation between Stag Industrial and China Datang

Assuming the 90 days trading horizon Stag Industrial is expected to generate 6.01 times less return on investment than China Datang. But when comparing it to its historical volatility, Stag Industrial is 2.38 times less risky than China Datang. It trades about 0.04 of its potential returns per unit of risk. China Datang is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  24.00  in China Datang on October 26, 2024 and sell it today you would earn a total of  1.00  from holding China Datang or generate 4.17% return on investment over 90 days.

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

Stag Industrial  vs.  China Datang

Stag Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

China Datang

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Datang are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Datang may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Stag Industrial and China Datang

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

The idea behind Stag Industrial and China Datang 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.