Correlation Between CN DATANG and IMPERIAL TOBACCO
Can any of the company-specific risk be diversified away by investing in both CN DATANG and IMPERIAL TOBACCO 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 CN DATANG and IMPERIAL TOBACCO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CN DATANG C and IMPERIAL TOBACCO , you can compare the effects of market volatilities on CN DATANG and IMPERIAL TOBACCO 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 CN DATANG with a short position of IMPERIAL TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of CN DATANG and IMPERIAL TOBACCO.
Diversification Opportunities for CN DATANG and IMPERIAL TOBACCO
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DT7 and IMPERIAL is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding CN DATANG C and IMPERIAL TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMPERIAL TOBACCO and CN DATANG 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 CN DATANG C are associated (or correlated) with IMPERIAL TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMPERIAL TOBACCO has no effect on the direction of CN DATANG i.e., CN DATANG and IMPERIAL TOBACCO go up and down completely randomly.
Pair Corralation between CN DATANG and IMPERIAL TOBACCO
Assuming the 90 days trading horizon CN DATANG C is expected to under-perform the IMPERIAL TOBACCO. In addition to that, CN DATANG is 3.84 times more volatile than IMPERIAL TOBACCO . It trades about -0.07 of its total potential returns per unit of risk. IMPERIAL TOBACCO is currently generating about -0.06 per unit of volatility. If you would invest 3,099 in IMPERIAL TOBACCO on October 20, 2024 and sell it today you would lose (26.00) from holding IMPERIAL TOBACCO or give up 0.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CN DATANG C vs. IMPERIAL TOBACCO
Performance |
| Timeline |
| CN DATANG C |
| IMPERIAL TOBACCO |
CN DATANG and IMPERIAL TOBACCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CN DATANG and IMPERIAL TOBACCO
The main advantage of trading using opposite CN DATANG and IMPERIAL TOBACCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CN DATANG position performs unexpectedly, IMPERIAL TOBACCO 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 IMPERIAL TOBACCO will offset losses from the drop in IMPERIAL TOBACCO's long position.| CN DATANG vs. Townsquare Media | CN DATANG vs. Nexstar Media Group | CN DATANG vs. Universal Entertainment | CN DATANG vs. WT OFFSHORE |
| IMPERIAL TOBACCO vs. CN DATANG C | IMPERIAL TOBACCO vs. INFORMATION SVC GRP | IMPERIAL TOBACCO vs. Information Services International Dentsu | IMPERIAL TOBACCO vs. Northern Data AG |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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