Correlation Between Dongjiang Environmental and Bengang Steel
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By analyzing existing cross correlation between Dongjiang Environmental Co and Bengang Steel Plates, you can compare the effects of market volatilities on Dongjiang Environmental and Bengang Steel 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 Dongjiang Environmental with a short position of Bengang Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongjiang Environmental and Bengang Steel.
Diversification Opportunities for Dongjiang Environmental and Bengang Steel
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dongjiang and Bengang is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Dongjiang Environmental Co and Bengang Steel Plates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bengang Steel Plates and Dongjiang Environmental 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 Dongjiang Environmental Co are associated (or correlated) with Bengang Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bengang Steel Plates has no effect on the direction of Dongjiang Environmental i.e., Dongjiang Environmental and Bengang Steel go up and down completely randomly.
Pair Corralation between Dongjiang Environmental and Bengang Steel
Assuming the 90 days trading horizon Dongjiang Environmental Co is expected to under-perform the Bengang Steel. But the stock apears to be less risky and, when comparing its historical volatility, Dongjiang Environmental Co is 1.01 times less risky than Bengang Steel. The stock trades about -0.01 of its potential returns per unit of risk. The Bengang Steel Plates is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 300.00 in Bengang Steel Plates on August 28, 2024 and sell it today you would earn a total of 40.00 from holding Bengang Steel Plates or generate 13.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongjiang Environmental Co vs. Bengang Steel Plates
Performance |
| Timeline |
| Dongjiang Environmental |
| Bengang Steel Plates |
Dongjiang Environmental and Bengang Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongjiang Environmental and Bengang Steel
The main advantage of trading using opposite Dongjiang Environmental and Bengang Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongjiang Environmental position performs unexpectedly, Bengang Steel 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 Bengang Steel will offset losses from the drop in Bengang Steel's long position.The idea behind Dongjiang Environmental Co and Bengang Steel Plates 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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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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