Correlation Between Industrial Securities and Dr Peng

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

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

Diversification Opportunities for Industrial Securities and Dr Peng

0.04

Correlation Coefficient

Industrial Securities  Dr Peng

Significant diversification

The 3 months correlation between Industrial and 600804 is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Securities Co and Dr Peng Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dr Peng Telecom and Industrial Securities 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 Industrial Securities Co are associated (or correlated) with Dr Peng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dr Peng Telecom has no effect on the direction of Industrial Securities i.e., Industrial Securities and Dr Peng go up and down completely randomly.

Pair Corralation between Industrial Securities and Dr Peng

Assuming the 90 days trading horizon Industrial Securities is expected to generate 1.05 times less return on investment than Dr Peng. But when comparing it to its historical volatility, Industrial Securities Co is 1.31 times less risky than Dr Peng. It trades about 0.14 of its potential returns per unit of risk. Dr Peng Telecom is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  164.00  in Dr Peng Telecom on September 3, 2024 and sell it today you would earn a total of  40.00  from holding Dr Peng Telecom or generate 24.39% return on investment over 90 days.

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

Industrial Securities Co  vs.  Dr Peng Telecom

Industrial Securities

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Securities Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial Securities sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Industrial Securities and Dr Peng

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

The idea behind Industrial Securities Co and Dr Peng Telecom 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.