Correlation Between Dr Peng and Railway Signal

Can any of the company-specific risk be diversified away by investing in both Dr Peng and Railway Signal 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 Dr Peng and Railway Signal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dr Peng Telecom and Railway Signal Communication, you can compare the effects of market volatilities on Dr Peng and Railway Signal 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 Dr Peng with a short position of Railway Signal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dr Peng and Railway Signal.

Diversification Opportunities for Dr Peng and Railway Signal

0.29

Correlation Coefficient

Dr Peng  Railway Signal

Modest diversification

The 3 months correlation between 600804 and Railway is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Dr Peng Telecom and Railway Signal Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Railway Signal Commu and Dr Peng 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 Dr Peng Telecom are associated (or correlated) with Railway Signal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Railway Signal Commu has no effect on the direction of Dr Peng i.e., Dr Peng and Railway Signal go up and down completely randomly.

Pair Corralation between Dr Peng and Railway Signal

Assuming the 90 days trading horizon Dr Peng Telecom is expected to generate 2.2 times more return on investment than Railway Signal. However, Dr Peng is 2.2 times more volatile than Railway Signal Communication. It trades about 0.38 of its potential returns per unit of risk. Railway Signal Communication is currently generating about 0.02 per unit of risk. If you would invest  150.00  in Dr Peng Telecom on September 3, 2024 and sell it today you would earn a total of  54.00  from holding Dr Peng Telecom or generate 36.0% return on investment over 90 days.

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

Dr Peng Telecom  vs.  Railway Signal Communication

Dr Peng Telecom

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dr Peng Telecom are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dr Peng sustained solid returns over the last few months and may actually be approaching a breakup point.

Railway Signal Commu

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Railway Signal Communication are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Railway Signal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dr Peng and Railway Signal

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

The idea behind Dr Peng Telecom and Railway Signal Communication 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.