Correlation Between Datang International and LEGACY IRON
Can any of the company-specific risk be diversified away by investing in both Datang International and LEGACY IRON at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Datang International and LEGACY IRON into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Datang International Power and LEGACY IRON ORE, you can compare the effects of market volatilities on Datang International and LEGACY IRON 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 Datang International with a short position of LEGACY IRON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Datang International and LEGACY IRON.
Diversification Opportunities for Datang International and LEGACY IRON
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Datang and LEGACY is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Datang International Power and LEGACY IRON ORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEGACY IRON ORE and Datang International 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 Datang International Power are associated (or correlated) with LEGACY IRON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LEGACY IRON ORE has no effect on the direction of Datang International i.e., Datang International and LEGACY IRON go up and down completely randomly.
Pair Corralation between Datang International and LEGACY IRON
Assuming the 90 days horizon Datang International Power is expected to generate 2.52 times more return on investment than LEGACY IRON. However, Datang International is 2.52 times more volatile than LEGACY IRON ORE. It trades about -0.06 of its potential returns per unit of risk. LEGACY IRON ORE is currently generating about -0.15 per unit of risk. If you would invest 18.00 in Datang International Power on August 31, 2024 and sell it today you would lose (2.00) from holding Datang International Power or give up 11.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Datang International Power vs. LEGACY IRON ORE
Performance |
| Timeline |
| Datang International |
| LEGACY IRON ORE |
Datang International and LEGACY IRON Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Datang International and LEGACY IRON
The main advantage of trading using opposite Datang International and LEGACY IRON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Datang International position performs unexpectedly, LEGACY IRON 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 LEGACY IRON will offset losses from the drop in LEGACY IRON's long position.| Datang International vs. CENTRICA ADR NEW | Datang International vs. TransAlta | Datang International vs. Superior Plus Corp | Datang International vs. NMI Holdings |
| LEGACY IRON vs. SIVERS SEMICONDUCTORS AB | LEGACY IRON vs. Darden Restaurants | LEGACY IRON vs. Reliance Steel Aluminum | LEGACY IRON vs. Q2M Managementberatung AG |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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