Correlation Between DICKER DATA and China Railway

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

By analyzing existing cross correlation between DICKER DATA LTD and China Railway Construction, you can compare the effects of market volatilities on DICKER DATA and China Railway 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 DICKER DATA with a short position of China Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of DICKER DATA and China Railway.

Diversification Opportunities for DICKER DATA and China Railway

0.01

Correlation Coefficient

DICKER DATA  China Railway

Significant diversification

The 3 months correlation between DICKER and China is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding DICKER DATA LTD and China Railway Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Constr and DICKER DATA 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 DICKER DATA LTD are associated (or correlated) with China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Constr has no effect on the direction of DICKER DATA i.e., DICKER DATA and China Railway go up and down completely randomly.

Pair Corralation between DICKER DATA and China Railway

Assuming the 90 days horizon DICKER DATA LTD is expected to under-perform the China Railway. But the stock apears to be less risky and, when comparing its historical volatility, DICKER DATA LTD is 1.11 times less risky than China Railway. The stock trades about -0.03 of its potential returns per unit of risk. The China Railway Construction is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  52.00  in China Railway Construction on September 12, 2024 and sell it today you would earn a total of  12.00  from holding China Railway Construction or generate 23.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

DICKER DATA LTD  vs.  China Railway Construction

DICKER DATA LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DICKER DATA LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, DICKER DATA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

China Railway Constr

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Railway Construction are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, China Railway reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DICKER DATA and China Railway

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

The idea behind DICKER DATA LTD and China Railway Construction 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.