Correlation Between Dongfeng Automobile and Chongqing Brewery
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By analyzing existing cross correlation between Dongfeng Automobile Co and Chongqing Brewery Co, you can compare the effects of market volatilities on Dongfeng Automobile and Chongqing Brewery 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 Chongqing Brewery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongfeng Automobile and Chongqing Brewery.
Diversification Opportunities for Dongfeng Automobile and Chongqing Brewery
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dongfeng and Chongqing is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Dongfeng Automobile Co and Chongqing Brewery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Brewery 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 Chongqing Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Brewery has no effect on the direction of Dongfeng Automobile i.e., Dongfeng Automobile and Chongqing Brewery go up and down completely randomly.
Pair Corralation between Dongfeng Automobile and Chongqing Brewery
Assuming the 90 days trading horizon Dongfeng Automobile Co is expected to generate 1.6 times more return on investment than Chongqing Brewery. However, Dongfeng Automobile is 1.6 times more volatile than Chongqing Brewery Co. It trades about -0.06 of its potential returns per unit of risk. Chongqing Brewery Co is currently generating about -0.31 per unit of risk. If you would invest 685.00 in Dongfeng Automobile Co on November 7, 2024 and sell it today you would lose (20.00) from holding Dongfeng Automobile Co or give up 2.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongfeng Automobile Co vs. Chongqing Brewery Co
Performance |
| Timeline |
| Dongfeng Automobile |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Chongqing Brewery |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Dongfeng Automobile and Chongqing Brewery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongfeng Automobile and Chongqing Brewery
The main advantage of trading using opposite Dongfeng Automobile and Chongqing Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongfeng Automobile position performs unexpectedly, Chongqing Brewery 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 Chongqing Brewery will offset losses from the drop in Chongqing Brewery's long position.The idea behind Dongfeng Automobile Co and Chongqing Brewery 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.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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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