Correlation Between WOODSIDE ENE and Datang International

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

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

Diversification Opportunities for WOODSIDE ENE and Datang International

0.33

Correlation Coefficient

WOODSIDE ENE  Datang International

Weak diversification

The 3 months correlation between WOODSIDE and Datang is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding WOODSIDE ENE SPADR and Datang International Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datang International and WOODSIDE ENE 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 WOODSIDE ENE SPADR are associated (or correlated) with Datang International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datang International has no effect on the direction of WOODSIDE ENE i.e., WOODSIDE ENE and Datang International go up and down completely randomly.

Pair Corralation between WOODSIDE ENE and Datang International

Assuming the 90 days horizon WOODSIDE ENE SPADR is expected to under-perform the Datang International. In addition to that, WOODSIDE ENE is 1.35 times more volatile than Datang International Power. It trades about -0.03 of its total potential returns per unit of risk. Datang International Power is currently generating about 0.01 per unit of volatility. If you would invest  17.00  in Datang International Power on September 28, 2024 and sell it today you would earn a total of  0.00  from holding Datang International Power or generate 0.0% return on investment over 90 days.

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

WOODSIDE ENE SPADR  vs.  Datang International Power

WOODSIDE ENE SPADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Datang International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with WOODSIDE ENE and Datang International

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

The idea behind WOODSIDE ENE SPADR and Datang International Power 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.