Correlation Between Deutsche Post and Sinotrans

Can any of the company-specific risk be diversified away by investing in both Deutsche Post and Sinotrans 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 Deutsche Post and Sinotrans into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Deutsche Post AG and Sinotrans Limited, you can compare the effects of market volatilities on Deutsche Post and Sinotrans 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 Deutsche Post with a short position of Sinotrans. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Post and Sinotrans.

Diversification Opportunities for Deutsche Post and Sinotrans

-0.65

Correlation Coefficient

Deutsche Post  Sinotrans

Excellent diversification

The 3 months correlation between Deutsche and Sinotrans is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Post AG and Sinotrans Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinotrans Limited and Deutsche Post 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 Deutsche Post AG are associated (or correlated) with Sinotrans. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinotrans Limited has no effect on the direction of Deutsche Post i.e., Deutsche Post and Sinotrans go up and down completely randomly.

Pair Corralation between Deutsche Post and Sinotrans

If you would invest  4,237  in Deutsche Post AG on February 2, 2024 and sell it today you would earn a total of  49.00  from holding Deutsche Post AG or generate 1.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Deutsche Post AG  vs.  Sinotrans Limited

Deutsche Post AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Post AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Sinotrans Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sinotrans Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sinotrans reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deutsche Post and Sinotrans

The main advantage of trading using opposite Deutsche Post and Sinotrans positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Post position performs unexpectedly, Sinotrans 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 Sinotrans will offset losses from the drop in Sinotrans' long position.

The idea behind Deutsche Post AG and Sinotrans Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.