Correlation Between CEZ A and China DatangRenewable
Can any of the company-specific risk be diversified away by investing in both CEZ A and China DatangRenewable 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 CEZ A and China DatangRenewable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CEZ a s and China Datang, you can compare the effects of market volatilities on CEZ A and China DatangRenewable 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 CEZ A with a short position of China DatangRenewable. Check out your portfolio center. Please also check ongoing floating volatility patterns of CEZ A and China DatangRenewable.
Diversification Opportunities for CEZ A and China DatangRenewable
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CEZ and China is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding CEZ a s and China Datang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China DatangRenewable and CEZ A 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 CEZ a s are associated (or correlated) with China DatangRenewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China DatangRenewable has no effect on the direction of CEZ A i.e., CEZ A and China DatangRenewable go up and down completely randomly.
Pair Corralation between CEZ A and China DatangRenewable
Assuming the 90 days horizon CEZ A is expected to generate 2.19 times less return on investment than China DatangRenewable. But when comparing it to its historical volatility, CEZ a s is 2.96 times less risky than China DatangRenewable. It trades about 0.06 of its potential returns per unit of risk. China Datang is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 15.00 in China Datang on September 3, 2024 and sell it today you would earn a total of 8.00 from holding China Datang or generate 53.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CEZ a s vs. China Datang
Performance |
| Timeline |
| CEZ a s |
| China DatangRenewable |
CEZ A and China DatangRenewable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CEZ A and China DatangRenewable
The main advantage of trading using opposite CEZ A and China DatangRenewable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CEZ A position performs unexpectedly, China DatangRenewable 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 China DatangRenewable will offset losses from the drop in China DatangRenewable's long position.| CEZ A vs. PennyMac Mortgage Investment | CEZ A vs. NIPPON STEEL SPADR | CEZ A vs. Gladstone Investment | CEZ A vs. Tianjin Capital Environmental |
| China DatangRenewable vs. The Southern | China DatangRenewable vs. VERBUND AG | China DatangRenewable vs. American Electric Power | China DatangRenewable vs. Xcel Energy |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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