Correlation Between China Dongsheng and AAP
Can any of the company-specific risk be diversified away by investing in both China Dongsheng and AAP 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 China Dongsheng and AAP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Dongsheng International and AAP Inc, you can compare the effects of market volatilities on China Dongsheng and AAP 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 China Dongsheng with a short position of AAP. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Dongsheng and AAP.
Diversification Opportunities for China Dongsheng and AAP
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between China and AAP is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding China Dongsheng International and AAP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAP Inc and China Dongsheng 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 China Dongsheng International are associated (or correlated) with AAP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAP Inc has no effect on the direction of China Dongsheng i.e., China Dongsheng and AAP go up and down completely randomly.
Pair Corralation between China Dongsheng and AAP
Given the investment horizon of 90 days China Dongsheng International is expected to generate 0.56 times more return on investment than AAP. However, China Dongsheng International is 1.77 times less risky than AAP. It trades about 0.12 of its potential returns per unit of risk. AAP Inc is currently generating about 0.06 per unit of risk. If you would invest 0.16 in China Dongsheng International on November 3, 2024 and sell it today you would earn a total of 0.02 from holding China Dongsheng International or generate 12.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Dongsheng International vs. AAP Inc
Performance |
| Timeline |
| China Dongsheng Inte |
| AAP Inc |
China Dongsheng and AAP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Dongsheng and AAP
The main advantage of trading using opposite China Dongsheng and AAP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Dongsheng position performs unexpectedly, AAP 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 AAP will offset losses from the drop in AAP's long position.| China Dongsheng vs. C2E Energy | China Dongsheng vs. Tanke Biosciences | China Dongsheng vs. Supurva Healthcare Group | China Dongsheng vs. Kasten Inc |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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