Correlation Between Dazhong Transportation and Sichuan Fulin
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By analyzing existing cross correlation between Dazhong Transportation Group and Sichuan Fulin Transportation, you can compare the effects of market volatilities on Dazhong Transportation and Sichuan Fulin 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 Dazhong Transportation with a short position of Sichuan Fulin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dazhong Transportation and Sichuan Fulin.
Diversification Opportunities for Dazhong Transportation and Sichuan Fulin
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dazhong and Sichuan is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Dazhong Transportation Group and Sichuan Fulin Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Fulin Transp and Dazhong Transportation 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 Dazhong Transportation Group are associated (or correlated) with Sichuan Fulin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Fulin Transp has no effect on the direction of Dazhong Transportation i.e., Dazhong Transportation and Sichuan Fulin go up and down completely randomly.
Pair Corralation between Dazhong Transportation and Sichuan Fulin
Assuming the 90 days trading horizon Dazhong Transportation is expected to generate 39.88 times less return on investment than Sichuan Fulin. But when comparing it to its historical volatility, Dazhong Transportation Group is 1.13 times less risky than Sichuan Fulin. It trades about 0.01 of its potential returns per unit of risk. Sichuan Fulin Transportation is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 657.00 in Sichuan Fulin Transportation on September 12, 2024 and sell it today you would earn a total of 121.00 from holding Sichuan Fulin Transportation or generate 18.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dazhong Transportation Group vs. Sichuan Fulin Transportation
Performance |
| Timeline |
| Dazhong Transportation |
| Sichuan Fulin Transp |
Dazhong Transportation and Sichuan Fulin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dazhong Transportation and Sichuan Fulin
The main advantage of trading using opposite Dazhong Transportation and Sichuan Fulin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dazhong Transportation position performs unexpectedly, Sichuan Fulin 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 Sichuan Fulin will offset losses from the drop in Sichuan Fulin's long position.The idea behind Dazhong Transportation Group and Sichuan Fulin Transportation 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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