Correlation Between Cayenne Entertainment and Dawushan Farm
Can any of the company-specific risk be diversified away by investing in both Cayenne Entertainment 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 Cayenne Entertainment and Dawushan Farm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cayenne Entertainment Technology and Dawushan Farm Tech, you can compare the effects of market volatilities on Cayenne Entertainment 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 Cayenne Entertainment with a short position of Dawushan Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cayenne Entertainment and Dawushan Farm.
Diversification Opportunities for Cayenne Entertainment and Dawushan Farm
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cayenne and Dawushan is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Cayenne Entertainment Technolo 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 Cayenne Entertainment 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 Cayenne Entertainment Technology 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 Cayenne Entertainment i.e., Cayenne Entertainment and Dawushan Farm go up and down completely randomly.
Pair Corralation between Cayenne Entertainment and Dawushan Farm
Assuming the 90 days trading horizon Cayenne Entertainment Technology is expected to generate 3.28 times more return on investment than Dawushan Farm. However, Cayenne Entertainment is 3.28 times more volatile than Dawushan Farm Tech. It trades about 0.09 of its potential returns per unit of risk. Dawushan Farm Tech is currently generating about -0.02 per unit of risk. If you would invest 5,454 in Cayenne Entertainment Technology on November 28, 2024 and sell it today you would earn a total of 2,446 from holding Cayenne Entertainment Technology or generate 44.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cayenne Entertainment Technolo vs. Dawushan Farm Tech
Performance |
| Timeline |
| Cayenne Entertainment |
| Dawushan Farm Tech |
Cayenne Entertainment and Dawushan Farm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cayenne Entertainment and Dawushan Farm
The main advantage of trading using opposite Cayenne Entertainment and Dawushan Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cayenne Entertainment 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 Cayenne Entertainment Technology 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.
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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