Correlation Between Meiloon Industrial and Daxin Materials
Can any of the company-specific risk be diversified away by investing in both Meiloon Industrial and Daxin Materials 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 Meiloon Industrial and Daxin Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meiloon Industrial Co and Daxin Materials Corp, you can compare the effects of market volatilities on Meiloon Industrial and Daxin Materials 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 Meiloon Industrial with a short position of Daxin Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meiloon Industrial and Daxin Materials.
Diversification Opportunities for Meiloon Industrial and Daxin Materials
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Meiloon and Daxin is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Meiloon Industrial Co and Daxin Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daxin Materials Corp and Meiloon Industrial 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 Meiloon Industrial Co are associated (or correlated) with Daxin Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daxin Materials Corp has no effect on the direction of Meiloon Industrial i.e., Meiloon Industrial and Daxin Materials go up and down completely randomly.
Pair Corralation between Meiloon Industrial and Daxin Materials
Assuming the 90 days trading horizon Meiloon Industrial is expected to generate 2.24 times less return on investment than Daxin Materials. But when comparing it to its historical volatility, Meiloon Industrial Co is 1.36 times less risky than Daxin Materials. It trades about 0.06 of its potential returns per unit of risk. Daxin Materials Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 6,660 in Daxin Materials Corp on August 26, 2024 and sell it today you would earn a total of 16,840 from holding Daxin Materials Corp or generate 252.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meiloon Industrial Co vs. Daxin Materials Corp
Performance |
| Timeline |
| Meiloon Industrial |
| Daxin Materials Corp |
Meiloon Industrial and Daxin Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meiloon Industrial and Daxin Materials
The main advantage of trading using opposite Meiloon Industrial and Daxin Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meiloon Industrial position performs unexpectedly, Daxin Materials 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 Daxin Materials will offset losses from the drop in Daxin Materials' long position.| Meiloon Industrial vs. Taiwan Semiconductor Manufacturing | Meiloon Industrial vs. Hon Hai Precision | Meiloon Industrial vs. MediaTek | Meiloon Industrial vs. Chunghwa Telecom Co |
| Daxin Materials vs. Cheng Shin Rubber | Daxin Materials vs. Taiwan Cement Corp | Daxin Materials vs. China Steel Chemical | Daxin Materials vs. Yulon Motor Co |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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