Correlation Between Dazhong Transportation and Chengdu Xinzhu
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By analyzing existing cross correlation between Dazhong Transportation Group and Chengdu Xinzhu RoadBridge, you can compare the effects of market volatilities on Dazhong Transportation and Chengdu Xinzhu 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 Chengdu Xinzhu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dazhong Transportation and Chengdu Xinzhu.
Diversification Opportunities for Dazhong Transportation and Chengdu Xinzhu
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dazhong and Chengdu is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Dazhong Transportation Group and Chengdu Xinzhu RoadBridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chengdu Xinzhu RoadBridge 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 Chengdu Xinzhu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chengdu Xinzhu RoadBridge has no effect on the direction of Dazhong Transportation i.e., Dazhong Transportation and Chengdu Xinzhu go up and down completely randomly.
Pair Corralation between Dazhong Transportation and Chengdu Xinzhu
Assuming the 90 days trading horizon Dazhong Transportation Group is expected to generate 0.71 times more return on investment than Chengdu Xinzhu. However, Dazhong Transportation Group is 1.4 times less risky than Chengdu Xinzhu. It trades about 0.08 of its potential returns per unit of risk. Chengdu Xinzhu RoadBridge is currently generating about 0.05 per unit of risk. If you would invest 25.00 in Dazhong Transportation Group on September 1, 2024 and sell it today you would earn a total of 1.00 from holding Dazhong Transportation Group or generate 4.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dazhong Transportation Group vs. Chengdu Xinzhu RoadBridge
Performance |
| Timeline |
| Dazhong Transportation |
| Chengdu Xinzhu RoadBridge |
Dazhong Transportation and Chengdu Xinzhu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dazhong Transportation and Chengdu Xinzhu
The main advantage of trading using opposite Dazhong Transportation and Chengdu Xinzhu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dazhong Transportation position performs unexpectedly, Chengdu Xinzhu 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 Chengdu Xinzhu will offset losses from the drop in Chengdu Xinzhu's long position.The idea behind Dazhong Transportation Group and Chengdu Xinzhu RoadBridge 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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