Correlation Between Chongqing Changan and Dawning Information
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By analyzing existing cross correlation between Chongqing Changan Automobile and Dawning Information Industry, you can compare the effects of market volatilities on Chongqing Changan and Dawning Information 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 Chongqing Changan with a short position of Dawning Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Changan and Dawning Information.
Diversification Opportunities for Chongqing Changan and Dawning Information
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chongqing and Dawning is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Changan Automobile and Dawning Information Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dawning Information and Chongqing Changan 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 Chongqing Changan Automobile are associated (or correlated) with Dawning Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dawning Information has no effect on the direction of Chongqing Changan i.e., Chongqing Changan and Dawning Information go up and down completely randomly.
Pair Corralation between Chongqing Changan and Dawning Information
Assuming the 90 days trading horizon Chongqing Changan Automobile is expected to under-perform the Dawning Information. But the stock apears to be less risky and, when comparing its historical volatility, Chongqing Changan Automobile is 2.52 times less risky than Dawning Information. The stock trades about -0.05 of its potential returns per unit of risk. The Dawning Information Industry is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 5,423 in Dawning Information Industry on August 29, 2024 and sell it today you would earn a total of 2,181 from holding Dawning Information Industry or generate 40.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Chongqing Changan Automobile vs. Dawning Information Industry
Performance |
| Timeline |
| Chongqing Changan |
| Dawning Information |
Chongqing Changan and Dawning Information Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chongqing Changan and Dawning Information
The main advantage of trading using opposite Chongqing Changan and Dawning Information positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chongqing Changan position performs unexpectedly, Dawning Information 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 Dawning Information will offset losses from the drop in Dawning Information's long position.The idea behind Chongqing Changan Automobile and Dawning Information Industry 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 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.
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