Correlation Between Dongfeng Automobile and Xiangyang Automobile
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By analyzing existing cross correlation between Dongfeng Automobile Co and Xiangyang Automobile Bearing, you can compare the effects of market volatilities on Dongfeng Automobile and Xiangyang Automobile 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 Dongfeng Automobile with a short position of Xiangyang Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongfeng Automobile and Xiangyang Automobile.
Diversification Opportunities for Dongfeng Automobile and Xiangyang Automobile
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dongfeng and Xiangyang is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Dongfeng Automobile Co and Xiangyang Automobile Bearing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiangyang Automobile and Dongfeng Automobile 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 Dongfeng Automobile Co are associated (or correlated) with Xiangyang Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiangyang Automobile has no effect on the direction of Dongfeng Automobile i.e., Dongfeng Automobile and Xiangyang Automobile go up and down completely randomly.
Pair Corralation between Dongfeng Automobile and Xiangyang Automobile
Assuming the 90 days trading horizon Dongfeng Automobile is expected to generate 5.99 times less return on investment than Xiangyang Automobile. But when comparing it to its historical volatility, Dongfeng Automobile Co is 1.33 times less risky than Xiangyang Automobile. It trades about 0.02 of its potential returns per unit of risk. Xiangyang Automobile Bearing is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 611.00 in Xiangyang Automobile Bearing on October 24, 2024 and sell it today you would earn a total of 29.00 from holding Xiangyang Automobile Bearing or generate 4.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongfeng Automobile Co vs. Xiangyang Automobile Bearing
Performance |
| Timeline |
| Dongfeng Automobile |
| Xiangyang Automobile |
Dongfeng Automobile and Xiangyang Automobile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongfeng Automobile and Xiangyang Automobile
The main advantage of trading using opposite Dongfeng Automobile and Xiangyang Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongfeng Automobile position performs unexpectedly, Xiangyang Automobile 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 Xiangyang Automobile will offset losses from the drop in Xiangyang Automobile's long position.The idea behind Dongfeng Automobile Co and Xiangyang Automobile Bearing 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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