Correlation Between China DatangRenewable and Longfor Group
Can any of the company-specific risk be diversified away by investing in both China DatangRenewable and Longfor 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 China DatangRenewable and Longfor Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Datang and Longfor Group Holdings, you can compare the effects of market volatilities on China DatangRenewable and Longfor 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 China DatangRenewable with a short position of Longfor Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of China DatangRenewable and Longfor Group.
Diversification Opportunities for China DatangRenewable and Longfor Group
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Longfor is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding China Datang and Longfor Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longfor Group Holdings 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 Longfor Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longfor Group Holdings has no effect on the direction of China DatangRenewable i.e., China DatangRenewable and Longfor Group go up and down completely randomly.
Pair Corralation between China DatangRenewable and Longfor Group
Assuming the 90 days horizon China DatangRenewable is expected to generate 1.02 times less return on investment than Longfor Group. But when comparing it to its historical volatility, China Datang is 1.42 times less risky than Longfor Group. It trades about 0.07 of its potential returns per unit of risk. Longfor Group Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 87.00 in Longfor Group Holdings on September 1, 2024 and sell it today you would earn a total of 43.00 from holding Longfor Group Holdings or generate 49.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.64% |
| Values | Daily Returns |
China Datang vs. Longfor Group Holdings
Performance |
| Timeline |
| China DatangRenewable |
| Longfor Group Holdings |
China DatangRenewable and Longfor Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China DatangRenewable and Longfor Group
The main advantage of trading using opposite China DatangRenewable and Longfor Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China DatangRenewable position performs unexpectedly, Longfor 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 Longfor Group will offset losses from the drop in Longfor Group's long position.| China DatangRenewable vs. GungHo Online Entertainment | China DatangRenewable vs. Algonquin Power Utilities | China DatangRenewable vs. MUTUIONLINE | China DatangRenewable vs. United Breweries Co |
| Longfor Group vs. Goodyear Tire Rubber | Longfor Group vs. THRACE PLASTICS | Longfor Group vs. Japan Post Insurance | Longfor Group vs. Direct Line Insurance |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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