Correlation Between Dupont De and China Eastern

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

By analyzing existing cross correlation between Dupont De Nemours and China Eastern Airlines, you can compare the effects of market volatilities on Dupont De and China Eastern 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 Dupont De with a short position of China Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and China Eastern.

Diversification Opportunities for Dupont De and China Eastern

-0.28

Correlation Coefficient

Dupont De  China Eastern

Very good diversification

The 3 months correlation between Dupont and China is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and China Eastern Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Eastern Airlines and Dupont De 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 Dupont De Nemours are associated (or correlated) with China Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Eastern Airlines has no effect on the direction of Dupont De i.e., Dupont De and China Eastern go up and down completely randomly.

Pair Corralation between Dupont De and China Eastern

Allowing for the 90-day total investment horizon Dupont De is expected to generate 4.38 times less return on investment than China Eastern. But when comparing it to its historical volatility, Dupont De Nemours is 1.45 times less risky than China Eastern. It trades about 0.03 of its potential returns per unit of risk. China Eastern Airlines is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  374.00  in China Eastern Airlines on August 31, 2024 and sell it today you would earn a total of  38.00  from holding China Eastern Airlines or generate 10.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Dupont De Nemours  vs.  China Eastern Airlines

Dupont De Nemours

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

China Eastern Airlines

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Eastern Airlines are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Eastern may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Dupont De and China Eastern

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

The idea behind Dupont De Nemours and China Eastern Airlines 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.