Correlation Between China Express and Do Fluoride

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

By analyzing existing cross correlation between China Express Airlines and Do Fluoride Chemicals Co, you can compare the effects of market volatilities on China Express and Do Fluoride 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 China Express with a short position of Do Fluoride. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Express and Do Fluoride.

Diversification Opportunities for China Express and Do Fluoride

0.93

Correlation Coefficient

China Express  Do Fluoride

Almost no diversification

The 3 months correlation between China and 002407 is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding China Express Airlines and Do Fluoride Chemicals Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Do Fluoride Chemicals and China Express 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 China Express Airlines are associated (or correlated) with Do Fluoride. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Do Fluoride Chemicals has no effect on the direction of China Express i.e., China Express and Do Fluoride go up and down completely randomly.

Pair Corralation between China Express and Do Fluoride

Assuming the 90 days trading horizon China Express Airlines is expected to under-perform the Do Fluoride. But the stock apears to be less risky and, when comparing its historical volatility, China Express Airlines is 1.74 times less risky than Do Fluoride. The stock trades about -0.12 of its potential returns per unit of risk. The Do Fluoride Chemicals Co is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,429  in Do Fluoride Chemicals Co on September 13, 2024 and sell it today you would lose (62.00) from holding Do Fluoride Chemicals Co or give up 4.34% of portfolio value over 90 days.

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

China Express Airlines  vs.  Do Fluoride Chemicals Co

China Express Airlines

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in China Express Airlines are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Express sustained solid returns over the last few months and may actually be approaching a breakup point.

Do Fluoride Chemicals

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Do Fluoride Chemicals Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Do Fluoride sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Express and Do Fluoride

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

The idea behind China Express Airlines and Do Fluoride Chemicals Co 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.