Correlation Between Daxin Materials and International CSRC
Can any of the company-specific risk be diversified away by investing in both Daxin Materials and International CSRC 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 Daxin Materials and International CSRC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daxin Materials Corp and International CSRC Investment, you can compare the effects of market volatilities on Daxin Materials and International CSRC 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 Daxin Materials with a short position of International CSRC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daxin Materials and International CSRC.
Diversification Opportunities for Daxin Materials and International CSRC
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Daxin and International is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Daxin Materials Corp and International CSRC Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International CSRC and Daxin Materials 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 Daxin Materials Corp are associated (or correlated) with International CSRC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International CSRC has no effect on the direction of Daxin Materials i.e., Daxin Materials and International CSRC go up and down completely randomly.
Pair Corralation between Daxin Materials and International CSRC
Assuming the 90 days trading horizon Daxin Materials Corp is expected to generate 3.0 times more return on investment than International CSRC. However, Daxin Materials is 3.0 times more volatile than International CSRC Investment. It trades about 0.08 of its potential returns per unit of risk. International CSRC Investment is currently generating about -0.08 per unit of risk. If you would invest 14,850 in Daxin Materials Corp on September 3, 2024 and sell it today you would earn a total of 5,600 from holding Daxin Materials Corp or generate 37.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daxin Materials Corp vs. International CSRC Investment
Performance |
| Timeline |
| Daxin Materials Corp |
| International CSRC |
Daxin Materials and International CSRC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daxin Materials and International CSRC
The main advantage of trading using opposite Daxin Materials and International CSRC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daxin Materials position performs unexpectedly, International CSRC 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 International CSRC will offset losses from the drop in International CSRC's long position.The idea behind Daxin Materials Corp and International CSRC Investment 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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