Correlation Between Advanced Technology and Dongfeng Automobile
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By analyzing existing cross correlation between Advanced Technology Materials and Dongfeng Automobile Co, you can compare the effects of market volatilities on Advanced Technology and Dongfeng Automobile 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 Advanced Technology with a short position of Dongfeng Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Technology and Dongfeng Automobile.
Diversification Opportunities for Advanced Technology and Dongfeng Automobile
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Advanced and Dongfeng is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Technology Materials and Dongfeng Automobile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongfeng Automobile and Advanced Technology 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 Advanced Technology Materials are associated (or correlated) with Dongfeng Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongfeng Automobile has no effect on the direction of Advanced Technology i.e., Advanced Technology and Dongfeng Automobile go up and down completely randomly.
Pair Corralation between Advanced Technology and Dongfeng Automobile
Assuming the 90 days trading horizon Advanced Technology Materials is expected to generate 0.78 times more return on investment than Dongfeng Automobile. However, Advanced Technology Materials is 1.29 times less risky than Dongfeng Automobile. It trades about 0.09 of its potential returns per unit of risk. Dongfeng Automobile Co is currently generating about 0.05 per unit of risk. If you would invest 758.00 in Advanced Technology Materials on November 8, 2024 and sell it today you would earn a total of 461.00 from holding Advanced Technology Materials or generate 60.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advanced Technology Materials vs. Dongfeng Automobile Co
Performance |
| Timeline |
| Advanced Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| Dongfeng Automobile |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Advanced Technology and Dongfeng Automobile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Technology and Dongfeng Automobile
The main advantage of trading using opposite Advanced Technology and Dongfeng Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Technology position performs unexpectedly, Dongfeng Automobile 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 Dongfeng Automobile will offset losses from the drop in Dongfeng Automobile's long position.The idea behind Advanced Technology Materials and Dongfeng Automobile Co 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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