Correlation Between DATANG INTL and Carrefour

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

By analyzing existing cross correlation between DATANG INTL POW and Carrefour SA, you can compare the effects of market volatilities on DATANG INTL and Carrefour 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 DATANG INTL with a short position of Carrefour. Check out your portfolio center. Please also check ongoing floating volatility patterns of DATANG INTL and Carrefour.

Diversification Opportunities for DATANG INTL and Carrefour

0.16

Correlation Coefficient

DATANG INTL  Carrefour

Average diversification

The 3 months correlation between DATANG and Carrefour is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding DATANG INTL POW and Carrefour SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carrefour SA and DATANG INTL 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 DATANG INTL POW are associated (or correlated) with Carrefour. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carrefour SA has no effect on the direction of DATANG INTL i.e., DATANG INTL and Carrefour go up and down completely randomly.

Pair Corralation between DATANG INTL and Carrefour

Assuming the 90 days trading horizon DATANG INTL POW is expected to generate 2.13 times more return on investment than Carrefour. However, DATANG INTL is 2.13 times more volatile than Carrefour SA. It trades about 0.05 of its potential returns per unit of risk. Carrefour SA is currently generating about -0.04 per unit of risk. If you would invest  12.00  in DATANG INTL POW on September 28, 2024 and sell it today you would earn a total of  5.00  from holding DATANG INTL POW or generate 41.67% return on investment over 90 days.

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

DATANG INTL POW  vs.  Carrefour SA

DATANG INTL POW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DATANG INTL POW has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, DATANG INTL is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Carrefour SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carrefour SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with DATANG INTL and Carrefour

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

The idea behind DATANG INTL POW and Carrefour SA 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 Global Correlations module to find global opportunities by holding instruments from different markets.