Correlation Between Dongfeng Automobile and Mengtian Home
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By analyzing existing cross correlation between Dongfeng Automobile Co and Mengtian Home Group, you can compare the effects of market volatilities on Dongfeng Automobile and Mengtian Home 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 Mengtian Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongfeng Automobile and Mengtian Home.
Diversification Opportunities for Dongfeng Automobile and Mengtian Home
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dongfeng and Mengtian is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Dongfeng Automobile Co and Mengtian Home Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mengtian Home 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 Mengtian Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mengtian Home Group has no effect on the direction of Dongfeng Automobile i.e., Dongfeng Automobile and Mengtian Home go up and down completely randomly.
Pair Corralation between Dongfeng Automobile and Mengtian Home
Assuming the 90 days trading horizon Dongfeng Automobile Co is expected to generate 1.05 times more return on investment than Mengtian Home. However, Dongfeng Automobile is 1.05 times more volatile than Mengtian Home Group. It trades about -0.28 of its potential returns per unit of risk. Mengtian Home Group is currently generating about -0.51 per unit of risk. If you would invest 819.00 in Dongfeng Automobile Co on October 16, 2024 and sell it today you would lose (163.00) from holding Dongfeng Automobile Co or give up 19.9% 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. Mengtian Home Group
Performance |
| Timeline |
| Dongfeng Automobile |
| Mengtian Home Group |
Dongfeng Automobile and Mengtian Home Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongfeng Automobile and Mengtian Home
The main advantage of trading using opposite Dongfeng Automobile and Mengtian Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongfeng Automobile position performs unexpectedly, Mengtian Home 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 Mengtian Home will offset losses from the drop in Mengtian Home's long position.The idea behind Dongfeng Automobile Co and Mengtian Home 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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