Correlation Between Dazhong Transportation and Guizhou Chanhen
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By analyzing existing cross correlation between Dazhong Transportation Group and Guizhou Chanhen Chemical, you can compare the effects of market volatilities on Dazhong Transportation and Guizhou Chanhen 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 Guizhou Chanhen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dazhong Transportation and Guizhou Chanhen.
Diversification Opportunities for Dazhong Transportation and Guizhou Chanhen
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dazhong and Guizhou is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Dazhong Transportation Group and Guizhou Chanhen Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guizhou Chanhen Chemical 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 Guizhou Chanhen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guizhou Chanhen Chemical has no effect on the direction of Dazhong Transportation i.e., Dazhong Transportation and Guizhou Chanhen go up and down completely randomly.
Pair Corralation between Dazhong Transportation and Guizhou Chanhen
Assuming the 90 days trading horizon Dazhong Transportation is expected to generate 1.94 times less return on investment than Guizhou Chanhen. But when comparing it to its historical volatility, Dazhong Transportation Group is 1.16 times less risky than Guizhou Chanhen. It trades about 0.08 of its potential returns per unit of risk. Guizhou Chanhen Chemical is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,125 in Guizhou Chanhen Chemical on September 1, 2024 and sell it today you would earn a total of 177.00 from holding Guizhou Chanhen Chemical or generate 8.33% 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. Guizhou Chanhen Chemical
Performance |
| Timeline |
| Dazhong Transportation |
| Guizhou Chanhen Chemical |
Dazhong Transportation and Guizhou Chanhen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dazhong Transportation and Guizhou Chanhen
The main advantage of trading using opposite Dazhong Transportation and Guizhou Chanhen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dazhong Transportation position performs unexpectedly, Guizhou Chanhen 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 Guizhou Chanhen will offset losses from the drop in Guizhou Chanhen's long position.The idea behind Dazhong Transportation Group and Guizhou Chanhen Chemical 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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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