Correlation Between Great Wall and Dongfeng
Can any of the company-specific risk be diversified away by investing in both Great Wall and Dongfeng 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 Great Wall and Dongfeng into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Wall Motor and Dongfeng Group, you can compare the effects of market volatilities on Great Wall and Dongfeng 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 Great Wall with a short position of Dongfeng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wall and Dongfeng.
Diversification Opportunities for Great Wall and Dongfeng
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Great and Dongfeng is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Great Wall Motor and Dongfeng Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongfeng Group and Great Wall 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 Great Wall Motor are associated (or correlated) with Dongfeng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongfeng Group has no effect on the direction of Great Wall i.e., Great Wall and Dongfeng go up and down completely randomly.
Pair Corralation between Great Wall and Dongfeng
Assuming the 90 days horizon Great Wall Motor is expected to generate 0.71 times more return on investment than Dongfeng. However, Great Wall Motor is 1.4 times less risky than Dongfeng. It trades about 0.04 of its potential returns per unit of risk. Dongfeng Group is currently generating about 0.02 per unit of risk. If you would invest 1,330 in Great Wall Motor on August 24, 2024 and sell it today you would earn a total of 509.00 from holding Great Wall Motor or generate 38.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.36% |
| Values | Daily Returns |
Great Wall Motor vs. Dongfeng Group
Performance |
| Timeline |
| Great Wall Motor |
| Dongfeng Group |
Great Wall and Dongfeng Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great Wall and Dongfeng
The main advantage of trading using opposite Great Wall and Dongfeng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Wall position performs unexpectedly, Dongfeng 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 Dongfeng will offset losses from the drop in Dongfeng's long position.| Great Wall vs. Mullen Automotive | Great Wall vs. Tesla Inc | Great Wall vs. Ford Motor | Great Wall vs. Nio Class A |
| Dongfeng vs. Isuzu Motors | Dongfeng vs. Renault SA | Dongfeng vs. Mazda Motor Corp | Dongfeng vs. Bayerische Motoren Werke |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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