Correlation Between Transport and Dong A

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

By analyzing existing cross correlation between Transport and Industry and Dong A Hotel, you can compare the effects of market volatilities on Transport and Dong A 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 Transport with a short position of Dong A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transport and Dong A.

Diversification Opportunities for Transport and Dong A

0.07

Correlation Coefficient

Transport  Dong A

Significant diversification

The 3 months correlation between Transport and Dong is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Transport and Industry and Dong A Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong A Hotel and Transport 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 Transport and Industry are associated (or correlated) with Dong A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong A Hotel has no effect on the direction of Transport i.e., Transport and Dong A go up and down completely randomly.

Pair Corralation between Transport and Dong A

Assuming the 90 days trading horizon Transport and Industry is expected to under-perform the Dong A. But the stock apears to be less risky and, when comparing its historical volatility, Transport and Industry is 1.56 times less risky than Dong A. The stock trades about -0.12 of its potential returns per unit of risk. The Dong A Hotel is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  308,000  in Dong A Hotel on October 7, 2024 and sell it today you would earn a total of  53,000  from holding Dong A Hotel or generate 17.21% return on investment over 90 days.

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

Transport and Industry  vs.  Dong A Hotel

Transport and Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transport and Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Dong A Hotel

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dong A Hotel are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Dong A may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Transport and Dong A

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

The idea behind Transport and Industry and Dong A Hotel 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 CEOs Directory module to screen CEOs from public companies around the world.