Correlation Between Daxin Materials and Shan Loong
Can any of the company-specific risk be diversified away by investing in both Daxin Materials and Shan Loong 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 Shan Loong 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 Shan Loong Transportation Co, you can compare the effects of market volatilities on Daxin Materials and Shan Loong 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 Shan Loong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daxin Materials and Shan Loong.
Diversification Opportunities for Daxin Materials and Shan Loong
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Daxin and Shan is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Daxin Materials Corp and Shan Loong Transportation Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shan Loong Transport 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 Shan Loong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shan Loong Transport has no effect on the direction of Daxin Materials i.e., Daxin Materials and Shan Loong go up and down completely randomly.
Pair Corralation between Daxin Materials and Shan Loong
Assuming the 90 days trading horizon Daxin Materials Corp is expected to generate 3.26 times more return on investment than Shan Loong. However, Daxin Materials is 3.26 times more volatile than Shan Loong Transportation Co. It trades about 0.08 of its potential returns per unit of risk. Shan Loong Transportation Co is currently generating about -0.17 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daxin Materials Corp vs. Shan Loong Transportation Co
Performance |
| Timeline |
| Daxin Materials Corp |
| Shan Loong Transport |
Daxin Materials and Shan Loong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daxin Materials and Shan Loong
The main advantage of trading using opposite Daxin Materials and Shan Loong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daxin Materials position performs unexpectedly, Shan Loong 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 Shan Loong will offset losses from the drop in Shan Loong's long position.The idea behind Daxin Materials Corp and Shan Loong Transportation Co 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.| Shan Loong vs. Tainan Spinning Co | Shan Loong vs. Chia Her Industrial | Shan Loong vs. WiseChip Semiconductor | Shan Loong vs. Novatek Microelectronics Corp |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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