Correlation Between Dalian Thermal and Rising Nonferrous

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

By analyzing existing cross correlation between Dalian Thermal Power and Rising Nonferrous Metals, you can compare the effects of market volatilities on Dalian Thermal and Rising Nonferrous 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 Dalian Thermal with a short position of Rising Nonferrous. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dalian Thermal and Rising Nonferrous.

Diversification Opportunities for Dalian Thermal and Rising Nonferrous

0.87

Correlation Coefficient

Dalian Thermal  Rising Nonferrous

Very poor diversification

The 3 months correlation between Dalian and Rising is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Dalian Thermal Power and Rising Nonferrous Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rising Nonferrous Metals and Dalian Thermal 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 Dalian Thermal Power are associated (or correlated) with Rising Nonferrous. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rising Nonferrous Metals has no effect on the direction of Dalian Thermal i.e., Dalian Thermal and Rising Nonferrous go up and down completely randomly.

Pair Corralation between Dalian Thermal and Rising Nonferrous

Assuming the 90 days trading horizon Dalian Thermal Power is expected to under-perform the Rising Nonferrous. In addition to that, Dalian Thermal is 1.24 times more volatile than Rising Nonferrous Metals. It trades about -0.01 of its total potential returns per unit of risk. Rising Nonferrous Metals is currently generating about 0.0 per unit of volatility. If you would invest  3,020  in Rising Nonferrous Metals on September 1, 2024 and sell it today you would lose (28.00) from holding Rising Nonferrous Metals or give up 0.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Dalian Thermal Power  vs.  Rising Nonferrous Metals

Dalian Thermal Power

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dalian Thermal Power are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dalian Thermal sustained solid returns over the last few months and may actually be approaching a breakup point.

Rising Nonferrous Metals

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rising Nonferrous Metals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Rising Nonferrous sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dalian Thermal and Rising Nonferrous

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

The idea behind Dalian Thermal Power and Rising Nonferrous Metals 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.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.