Correlation Between China Development and Darwin Precisions
Can any of the company-specific risk be diversified away by investing in both China Development and Darwin Precisions 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 China Development and Darwin Precisions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Development Financial and Darwin Precisions Corp, you can compare the effects of market volatilities on China Development and Darwin Precisions 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 China Development with a short position of Darwin Precisions. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Development and Darwin Precisions.
Diversification Opportunities for China Development and Darwin Precisions
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between China and Darwin is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding China Development Financial and Darwin Precisions Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darwin Precisions Corp and China Development 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 China Development Financial are associated (or correlated) with Darwin Precisions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darwin Precisions Corp has no effect on the direction of China Development i.e., China Development and Darwin Precisions go up and down completely randomly.
Pair Corralation between China Development and Darwin Precisions
Assuming the 90 days trading horizon China Development Financial is expected to generate 0.89 times more return on investment than Darwin Precisions. However, China Development Financial is 1.12 times less risky than Darwin Precisions. It trades about 0.09 of its potential returns per unit of risk. Darwin Precisions Corp is currently generating about -0.05 per unit of risk. If you would invest 1,410 in China Development Financial on September 1, 2024 and sell it today you would earn a total of 310.00 from holding China Development Financial or generate 21.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.22% |
| Values | Daily Returns |
China Development Financial vs. Darwin Precisions Corp
Performance |
| Timeline |
| China Development |
| Darwin Precisions Corp |
China Development and Darwin Precisions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Development and Darwin Precisions
The main advantage of trading using opposite China Development and Darwin Precisions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Development position performs unexpectedly, Darwin Precisions 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 Darwin Precisions will offset losses from the drop in Darwin Precisions' long position.| China Development vs. Central Reinsurance Corp | China Development vs. Huaku Development Co | China Development vs. Fubon Financial Holding |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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