Correlation Between Dongfeng Automobile and Wuhan Yangtze
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By analyzing existing cross correlation between Dongfeng Automobile Co and Wuhan Yangtze Communication, you can compare the effects of market volatilities on Dongfeng Automobile and Wuhan Yangtze 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 Wuhan Yangtze. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongfeng Automobile and Wuhan Yangtze.
Diversification Opportunities for Dongfeng Automobile and Wuhan Yangtze
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dongfeng and Wuhan is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dongfeng Automobile Co and Wuhan Yangtze Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wuhan Yangtze Commun 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 Wuhan Yangtze. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wuhan Yangtze Commun has no effect on the direction of Dongfeng Automobile i.e., Dongfeng Automobile and Wuhan Yangtze go up and down completely randomly.
Pair Corralation between Dongfeng Automobile and Wuhan Yangtze
Assuming the 90 days trading horizon Dongfeng Automobile Co is expected to under-perform the Wuhan Yangtze. But the stock apears to be less risky and, when comparing its historical volatility, Dongfeng Automobile Co is 1.2 times less risky than Wuhan Yangtze. The stock trades about -0.19 of its potential returns per unit of risk. The Wuhan Yangtze Communication is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,226 in Wuhan Yangtze Communication on November 3, 2024 and sell it today you would earn a total of 67.00 from holding Wuhan Yangtze Communication or generate 3.01% 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. Wuhan Yangtze Communication
Performance |
| Timeline |
| Dongfeng Automobile |
| Wuhan Yangtze Commun |
Dongfeng Automobile and Wuhan Yangtze Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongfeng Automobile and Wuhan Yangtze
The main advantage of trading using opposite Dongfeng Automobile and Wuhan Yangtze positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongfeng Automobile position performs unexpectedly, Wuhan Yangtze 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 Wuhan Yangtze will offset losses from the drop in Wuhan Yangtze's long position.The idea behind Dongfeng Automobile Co and Wuhan Yangtze Communication 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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