Correlation Between Dongfeng Automobile and New China
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By analyzing existing cross correlation between Dongfeng Automobile Co and New China Life, you can compare the effects of market volatilities on Dongfeng Automobile and New China 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 Dongfeng Automobile with a short position of New China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongfeng Automobile and New China.
Diversification Opportunities for Dongfeng Automobile and New China
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dongfeng and New is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dongfeng Automobile Co and New China Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New China Life and Dongfeng Automobile 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 Dongfeng Automobile Co are associated (or correlated) with New China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New China Life has no effect on the direction of Dongfeng Automobile i.e., Dongfeng Automobile and New China go up and down completely randomly.
Pair Corralation between Dongfeng Automobile and New China
Assuming the 90 days trading horizon Dongfeng Automobile Co is expected to generate 1.24 times more return on investment than New China. However, Dongfeng Automobile is 1.24 times more volatile than New China Life. It trades about 0.04 of its potential returns per unit of risk. New China Life is currently generating about 0.03 per unit of risk. If you would invest 567.00 in Dongfeng Automobile Co on September 25, 2024 and sell it today you would earn a total of 158.00 from holding Dongfeng Automobile Co or generate 27.87% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Dongfeng Automobile Co vs. New China Life
Performance |
Timeline |
Dongfeng Automobile |
New China Life |
Dongfeng Automobile and New China Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Dongfeng Automobile and New China
The main advantage of trading using opposite Dongfeng Automobile and New China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongfeng Automobile position performs unexpectedly, New China 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 New China will offset losses from the drop in New China's long position.The idea behind Dongfeng Automobile Co and New China Life 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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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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