Correlation Between Dongfeng Automobile and China Railway
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By analyzing existing cross correlation between Dongfeng Automobile Co and China Railway Group, you can compare the effects of market volatilities on Dongfeng Automobile and China Railway 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 China Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongfeng Automobile and China Railway.
Diversification Opportunities for Dongfeng Automobile and China Railway
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dongfeng and China is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Dongfeng Automobile Co and China Railway Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Group 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 China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Group has no effect on the direction of Dongfeng Automobile i.e., Dongfeng Automobile and China Railway go up and down completely randomly.
Pair Corralation between Dongfeng Automobile and China Railway
Assuming the 90 days trading horizon Dongfeng Automobile Co is expected to generate 1.28 times more return on investment than China Railway. However, Dongfeng Automobile is 1.28 times more volatile than China Railway Group. It trades about 0.03 of its potential returns per unit of risk. China Railway Group is currently generating about 0.03 per unit of risk. If you would invest 562.00 in Dongfeng Automobile Co on September 25, 2024 and sell it today you would earn a total of 163.00 from holding Dongfeng Automobile Co or generate 29.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongfeng Automobile Co vs. China Railway Group
Performance |
| Timeline |
| Dongfeng Automobile |
| China Railway Group |
Dongfeng Automobile and China Railway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongfeng Automobile and China Railway
The main advantage of trading using opposite Dongfeng Automobile and China Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongfeng Automobile position performs unexpectedly, China Railway 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 China Railway will offset losses from the drop in China Railway's long position.The idea behind Dongfeng Automobile Co and China Railway Group 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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