Correlation Between Four Seasons and Dunxin Financial

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

By analyzing existing cross correlation between Four Seasons Education and Dunxin Financial Holdings, you can compare the effects of market volatilities on Four Seasons and Dunxin Financial 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 Four Seasons with a short position of Dunxin Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Four Seasons and Dunxin Financial.

Diversification Opportunities for Four Seasons and Dunxin Financial

0.29

Correlation Coefficient

Four Seasons  Dunxin Financial

Modest diversification

The 3 months correlation between Four and Dunxin is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Four Seasons Education and Dunxin Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dunxin Financial Holdings and Four Seasons 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 Four Seasons Education are associated (or correlated) with Dunxin Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dunxin Financial Holdings has no effect on the direction of Four Seasons i.e., Four Seasons and Dunxin Financial go up and down completely randomly.

Pair Corralation between Four Seasons and Dunxin Financial

Given the investment horizon of 90 days Four Seasons Education is expected to generate 0.18 times more return on investment than Dunxin Financial. However, Four Seasons Education is 5.45 times less risky than Dunxin Financial. It trades about -0.02 of its potential returns per unit of risk. Dunxin Financial Holdings is currently generating about -0.44 per unit of risk. If you would invest  1,150  in Four Seasons Education on September 5, 2024 and sell it today you would lose (120.00) from holding Four Seasons Education or give up 10.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	15.63%
Values	Daily Returns

Four Seasons Education  vs.  Dunxin Financial Holdings

Four Seasons Education

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dunxin Financial Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dunxin Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Four Seasons and Dunxin Financial

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

The idea behind Four Seasons Education and Dunxin Financial Holdings 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.