Correlation Between Dongjiang Environmental and China World

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Can any of the company-specific risk be diversified away by investing in both Dongjiang Environmental and China World 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 Dongjiang Environmental and China World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dongjiang Environmental Co and China World Trade, you can compare the effects of market volatilities on Dongjiang Environmental and China World 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 China World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongjiang Environmental and China World.

Diversification Opportunities for Dongjiang Environmental and China World

0.18
  Correlation Coefficient

Average diversification

The 3 months correlation between Dongjiang and China is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Dongjiang Environmental Co and China World Trade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China World Trade 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 China World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China World Trade has no effect on the direction of Dongjiang Environmental i.e., Dongjiang Environmental and China World go up and down completely randomly.

Pair Corralation between Dongjiang Environmental and China World

Assuming the 90 days trading horizon Dongjiang Environmental Co is expected to under-perform the China World. In addition to that, Dongjiang Environmental is 1.71 times more volatile than China World Trade. It trades about -0.2 of its total potential returns per unit of risk. China World Trade is currently generating about -0.21 per unit of volatility. If you would invest  2,365  in China World Trade on August 28, 2024 and sell it today you would lose (137.00) from holding China World Trade or give up 5.79% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Dongjiang Environmental Co  vs.  China World Trade

 Performance 
       Timeline  
Dongjiang Environmental 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Dongjiang Environmental Co are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongjiang Environmental sustained solid returns over the last few months and may actually be approaching a breakup point.
China World Trade 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in China World Trade are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China World may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Dongjiang Environmental and China World Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dongjiang Environmental and China World

The main advantage of trading using opposite Dongjiang Environmental and China World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongjiang Environmental position performs unexpectedly, China World 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 China World will offset losses from the drop in China World's long position.
The idea behind Dongjiang Environmental Co and China World Trade 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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