Correlation Between Datang International and Woolworths Group
Can any of the company-specific risk be diversified away by investing in both Datang International and Woolworths Group 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 Woolworths Group 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 Woolworths Group Limited, you can compare the effects of market volatilities on Datang International and Woolworths Group 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 Woolworths Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Datang International and Woolworths Group.
Diversification Opportunities for Datang International and Woolworths Group
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Datang and Woolworths is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Datang International Power and Woolworths Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths Group 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 Woolworths Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woolworths Group has no effect on the direction of Datang International i.e., Datang International and Woolworths Group go up and down completely randomly.
Pair Corralation between Datang International and Woolworths Group
Assuming the 90 days horizon Datang International Power is expected to generate 3.3 times more return on investment than Woolworths Group. However, Datang International is 3.3 times more volatile than Woolworths Group Limited. It trades about 0.04 of its potential returns per unit of risk. Woolworths Group Limited is currently generating about 0.0 per unit of risk. If you would invest 10.00 in Datang International Power on September 3, 2024 and sell it today you would earn a total of 6.00 from holding Datang International Power or generate 60.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Datang International Power vs. Woolworths Group Limited
Performance |
| Timeline |
| Datang International |
| Woolworths Group |
Datang International and Woolworths Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Datang International and Woolworths Group
The main advantage of trading using opposite Datang International and Woolworths Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Datang International position performs unexpectedly, Woolworths Group 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 Woolworths Group will offset losses from the drop in Woolworths Group's long position.| Datang International vs. CENTRICA ADR NEW | Datang International vs. Superior Plus Corp | Datang International vs. NMI Holdings | Datang International vs. Origin Agritech |
| Woolworths Group vs. Automatic Data Processing | Woolworths Group vs. Datang International Power | Woolworths Group vs. UNITED UTILITIES GR | Woolworths Group vs. COMMERCIAL VEHICLE |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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