Correlation Between Dongjiang Environmental and Fujian Longzhou
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By analyzing existing cross correlation between Dongjiang Environmental Co and Fujian Longzhou Transportation, you can compare the effects of market volatilities on Dongjiang Environmental and Fujian Longzhou 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 Fujian Longzhou. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongjiang Environmental and Fujian Longzhou.
Diversification Opportunities for Dongjiang Environmental and Fujian Longzhou
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dongjiang and Fujian is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Dongjiang Environmental Co and Fujian Longzhou Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Longzhou Tran 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 Fujian Longzhou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Longzhou Tran has no effect on the direction of Dongjiang Environmental i.e., Dongjiang Environmental and Fujian Longzhou go up and down completely randomly.
Pair Corralation between Dongjiang Environmental and Fujian Longzhou
Assuming the 90 days trading horizon Dongjiang Environmental is expected to generate 299.86 times less return on investment than Fujian Longzhou. But when comparing it to its historical volatility, Dongjiang Environmental Co is 1.99 times less risky than Fujian Longzhou. It trades about 0.0 of its potential returns per unit of risk. Fujian Longzhou Transportation is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 497.00 in Fujian Longzhou Transportation on September 14, 2024 and sell it today you would earn a total of 90.00 from holding Fujian Longzhou Transportation or generate 18.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongjiang Environmental Co vs. Fujian Longzhou Transportation
Performance |
| Timeline |
| Dongjiang Environmental |
| Fujian Longzhou Tran |
Dongjiang Environmental and Fujian Longzhou Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongjiang Environmental and Fujian Longzhou
The main advantage of trading using opposite Dongjiang Environmental and Fujian Longzhou positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongjiang Environmental position performs unexpectedly, Fujian Longzhou 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 Fujian Longzhou will offset losses from the drop in Fujian Longzhou's long position.The idea behind Dongjiang Environmental Co and Fujian Longzhou Transportation 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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