Correlation Between Run Long and Da Li

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

By analyzing existing cross correlation between Run Long Construction and Da Li Development Co, you can compare the effects of market volatilities on Run Long and Da Li 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 Run Long with a short position of Da Li. Check out your portfolio center. Please also check ongoing floating volatility patterns of Run Long and Da Li.

Diversification Opportunities for Run Long and Da Li

0.7

Correlation Coefficient

Run Long  Da Li

Poor diversification

The 3 months correlation between Run and 6177 is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Run Long Construction and Da Li Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Da Li Development and Run Long 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 Run Long Construction are associated (or correlated) with Da Li. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Da Li Development has no effect on the direction of Run Long i.e., Run Long and Da Li go up and down completely randomly.

Pair Corralation between Run Long and Da Li

Assuming the 90 days trading horizon Run Long Construction is expected to under-perform the Da Li. But the stock apears to be less risky and, when comparing its historical volatility, Run Long Construction is 1.4 times less risky than Da Li. The stock trades about -0.35 of its potential returns per unit of risk. The Da Li Development Co is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  4,940  in Da Li Development Co on September 29, 2024 and sell it today you would lose (515.00) from holding Da Li Development Co or give up 10.43% of portfolio value over 90 days.

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

Run Long Construction  vs.  Da Li Development Co

Run Long Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Run Long Construction 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.

Da Li Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Da Li Development Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Run Long and Da Li

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

The idea behind Run Long Construction and Da Li Development 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.

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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.