Correlation Between Shinkong Insurance and Dawushan Farm
Can any of the company-specific risk be diversified away by investing in both Shinkong Insurance and Dawushan Farm 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 Shinkong Insurance and Dawushan Farm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shinkong Insurance Co and Dawushan Farm Tech, you can compare the effects of market volatilities on Shinkong Insurance and Dawushan Farm 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 Shinkong Insurance with a short position of Dawushan Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shinkong Insurance and Dawushan Farm.
Diversification Opportunities for Shinkong Insurance and Dawushan Farm
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Shinkong and Dawushan is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Shinkong Insurance Co and Dawushan Farm Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dawushan Farm Tech and Shinkong Insurance 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 Shinkong Insurance Co are associated (or correlated) with Dawushan Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dawushan Farm Tech has no effect on the direction of Shinkong Insurance i.e., Shinkong Insurance and Dawushan Farm go up and down completely randomly.
Pair Corralation between Shinkong Insurance and Dawushan Farm
Assuming the 90 days trading horizon Shinkong Insurance Co is expected to under-perform the Dawushan Farm. But the stock apears to be less risky and, when comparing its historical volatility, Shinkong Insurance Co is 1.05 times less risky than Dawushan Farm. The stock trades about -0.04 of its potential returns per unit of risk. The Dawushan Farm Tech is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 4,880 in Dawushan Farm Tech on November 5, 2024 and sell it today you would earn a total of 110.00 from holding Dawushan Farm Tech or generate 2.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shinkong Insurance Co vs. Dawushan Farm Tech
Performance |
| Timeline |
| Shinkong Insurance |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
| Dawushan Farm Tech |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
Shinkong Insurance and Dawushan Farm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shinkong Insurance and Dawushan Farm
The main advantage of trading using opposite Shinkong Insurance and Dawushan Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shinkong Insurance position performs unexpectedly, Dawushan Farm 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 Dawushan Farm will offset losses from the drop in Dawushan Farm's long position.The idea behind Shinkong Insurance Co and Dawushan Farm Tech 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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