Correlation Between Chang Type and Dawushan Farm

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

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

Diversification Opportunities for Chang Type and Dawushan Farm

0.32

Correlation Coefficient

Chang Type  Dawushan Farm

Weak diversification

The 3 months correlation between Chang and Dawushan is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Chang Type Industrial and Dawushan Farm Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dawushan Farm Tech and Chang Type 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 Chang Type Industrial are associated (or correlated) with Dawushan Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dawushan Farm Tech has no effect on the direction of Chang Type i.e., Chang Type and Dawushan Farm go up and down completely randomly.

Pair Corralation between Chang Type and Dawushan Farm

Assuming the 90 days trading horizon Chang Type Industrial is expected to under-perform the Dawushan Farm. But the stock apears to be less risky and, when comparing its historical volatility, Chang Type Industrial is 1.48 times less risky than Dawushan Farm. The stock trades about -0.29 of its potential returns per unit of risk. The Dawushan Farm Tech is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  5,000  in Dawushan Farm Tech on September 29, 2024 and sell it today you would lose (80.00) from holding Dawushan Farm Tech or give up 1.6% of portfolio value over 90 days.

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

Chang Type Industrial  vs.  Dawushan Farm Tech

Chang Type Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chang Type Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Dawushan Farm Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dawushan Farm Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Dawushan Farm is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Chang Type and Dawushan Farm

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

The idea behind Chang Type Industrial and Dawushan Farm Tech 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.