Correlation Between Davis Commodities and China Jo
Can any of the company-specific risk be diversified away by investing in both Davis Commodities and China Jo 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 Davis Commodities and China Jo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Davis Commodities Limited and China Jo Jo Drugstores, you can compare the effects of market volatilities on Davis Commodities and China Jo 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 Davis Commodities with a short position of China Jo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Commodities and China Jo.
Diversification Opportunities for Davis Commodities and China Jo
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Davis and China is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Davis Commodities Limited and China Jo Jo Drugstores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Jo Jo and Davis Commodities 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 Davis Commodities Limited are associated (or correlated) with China Jo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Jo Jo has no effect on the direction of Davis Commodities i.e., Davis Commodities and China Jo go up and down completely randomly.
Pair Corralation between Davis Commodities and China Jo
Given the investment horizon of 90 days Davis Commodities Limited is expected to under-perform the China Jo. But the stock apears to be less risky and, when comparing its historical volatility, Davis Commodities Limited is 2.5 times less risky than China Jo. The stock trades about -0.22 of its potential returns per unit of risk. The China Jo Jo Drugstores is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 182.00 in China Jo Jo Drugstores on August 24, 2024 and sell it today you would earn a total of 16.00 from holding China Jo Jo Drugstores or generate 8.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Davis Commodities Limited vs. China Jo Jo Drugstores
Performance |
| Timeline |
| Davis Commodities |
| China Jo Jo |
Davis Commodities and China Jo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Davis Commodities and China Jo
The main advantage of trading using opposite Davis Commodities and China Jo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis Commodities position performs unexpectedly, China Jo 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 Jo will offset losses from the drop in China Jo's long position.| Davis Commodities vs. KVH Industries | Davis Commodities vs. China Clean Energy | Davis Commodities vs. Northstar Clean Technologies | Davis Commodities vs. Space Communication |
| China Jo vs. SunLink Health Systems | China Jo vs. Leafly Holdings | China Jo vs. Allstar Health Brands | China Jo vs. Walgreens Boots Alliance |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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