Correlation Between China DatangRenewable and ARISTOCRAT LEISURE
Can any of the company-specific risk be diversified away by investing in both China DatangRenewable and ARISTOCRAT LEISURE 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 DatangRenewable and ARISTOCRAT LEISURE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Datang and ARISTOCRAT LEISURE, you can compare the effects of market volatilities on China DatangRenewable and ARISTOCRAT LEISURE 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 DatangRenewable with a short position of ARISTOCRAT LEISURE. Check out your portfolio center. Please also check ongoing floating volatility patterns of China DatangRenewable and ARISTOCRAT LEISURE.
Diversification Opportunities for China DatangRenewable and ARISTOCRAT LEISURE
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and ARISTOCRAT is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding China Datang and ARISTOCRAT LEISURE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARISTOCRAT LEISURE and China DatangRenewable 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 Datang are associated (or correlated) with ARISTOCRAT LEISURE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARISTOCRAT LEISURE has no effect on the direction of China DatangRenewable i.e., China DatangRenewable and ARISTOCRAT LEISURE go up and down completely randomly.
Pair Corralation between China DatangRenewable and ARISTOCRAT LEISURE
Assuming the 90 days horizon China DatangRenewable is expected to generate 6.44 times less return on investment than ARISTOCRAT LEISURE. In addition to that, China DatangRenewable is 2.56 times more volatile than ARISTOCRAT LEISURE. It trades about 0.01 of its total potential returns per unit of risk. ARISTOCRAT LEISURE is currently generating about 0.19 per unit of volatility. If you would invest 4,140 in ARISTOCRAT LEISURE on October 11, 2024 and sell it today you would earn a total of 140.00 from holding ARISTOCRAT LEISURE or generate 3.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.44% |
| Values | Daily Returns |
China Datang vs. ARISTOCRAT LEISURE
Performance |
| Timeline |
| China DatangRenewable |
| ARISTOCRAT LEISURE |
China DatangRenewable and ARISTOCRAT LEISURE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China DatangRenewable and ARISTOCRAT LEISURE
The main advantage of trading using opposite China DatangRenewable and ARISTOCRAT LEISURE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China DatangRenewable position performs unexpectedly, ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE will offset losses from the drop in ARISTOCRAT LEISURE's long position.| China DatangRenewable vs. Planet Fitness | China DatangRenewable vs. US Physical Therapy | China DatangRenewable vs. CLOVER HEALTH INV | China DatangRenewable vs. Tencent Music Entertainment |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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