Correlation Between Dazhong Transportation and Duzhe Publishing

Can any of the company-specific risk be diversified away by investing in both Dazhong Transportation and Duzhe Publishing 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 Dazhong Transportation and Duzhe Publishing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dazhong Transportation Group and Duzhe Publishing Media, you can compare the effects of market volatilities on Dazhong Transportation and Duzhe Publishing 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 Dazhong Transportation with a short position of Duzhe Publishing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dazhong Transportation and Duzhe Publishing.

Diversification Opportunities for Dazhong Transportation and Duzhe Publishing

0.6

Correlation Coefficient

Dazhong Transportation  Duzhe Publishing

Poor diversification

The 3 months correlation between Dazhong and Duzhe is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dazhong Transportation Group and Duzhe Publishing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duzhe Publishing Media and Dazhong Transportation 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 Dazhong Transportation Group are associated (or correlated) with Duzhe Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duzhe Publishing Media has no effect on the direction of Dazhong Transportation i.e., Dazhong Transportation and Duzhe Publishing go up and down completely randomly.

Pair Corralation between Dazhong Transportation and Duzhe Publishing

Assuming the 90 days trading horizon Dazhong Transportation is expected to generate 1.16 times less return on investment than Duzhe Publishing. But when comparing it to its historical volatility, Dazhong Transportation Group is 1.22 times less risky than Duzhe Publishing. It trades about 0.07 of its potential returns per unit of risk. Duzhe Publishing Media is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  581.00  in Duzhe Publishing Media on September 30, 2024 and sell it today you would earn a total of  59.00  from holding Duzhe Publishing Media or generate 10.15% return on investment over 90 days.

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

Dazhong Transportation Group  vs.  Duzhe Publishing Media

Dazhong Transportation

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dazhong Transportation Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dazhong Transportation may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Duzhe Publishing Media

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Duzhe Publishing Media are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Duzhe Publishing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dazhong Transportation and Duzhe Publishing

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

The idea behind Dazhong Transportation Group and Duzhe Publishing Media 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.