Correlation Between Finance Of and Dunxin Financial

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

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

Diversification Opportunities for Finance Of and Dunxin Financial

-0.56

Correlation Coefficient

Finance Of  Dunxin Financial

Excellent diversification

The 3 months correlation between Finance and Dunxin is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Finance of America 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 Finance Of 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 Finance of America 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 Finance Of i.e., Finance Of and Dunxin Financial go up and down completely randomly.

Pair Corralation between Finance Of and Dunxin Financial

Considering the 90-day investment horizon Finance of America is expected to generate 0.41 times more return on investment than Dunxin Financial. However, Finance of America is 2.46 times less risky than Dunxin Financial. It trades about 0.17 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  974.00  in Finance of America on September 5, 2024 and sell it today you would earn a total of  1,013  from holding Finance of America or generate 104.0% return on investment over 90 days.

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

Finance of America  vs.  Dunxin Financial Holdings

Finance of America

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Finance of America are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Finance Of sustained solid returns over the last few months and may actually be approaching a breakup point.

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 Finance Of and Dunxin Financial

The main advantage of trading using opposite Finance Of and Dunxin Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Finance Of 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 Finance of America 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.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.