Correlation Between Datang International and DATATEC

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

By analyzing existing cross correlation between Datang International Power and DATATEC LTD 2, you can compare the effects of market volatilities on Datang International and DATATEC 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 Datang International with a short position of DATATEC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Datang International and DATATEC.

Diversification Opportunities for Datang International and DATATEC

0.68

Correlation Coefficient

Datang International  DATATEC

Poor diversification

The 3 months correlation between Datang and DATATEC is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Datang International Power and DATATEC LTD 2 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DATATEC LTD 2 and Datang International 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 Datang International Power are associated (or correlated) with DATATEC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DATATEC LTD 2 has no effect on the direction of Datang International i.e., Datang International and DATATEC go up and down completely randomly.

Pair Corralation between Datang International and DATATEC

Assuming the 90 days horizon Datang International Power is expected to generate 2.22 times more return on investment than DATATEC. However, Datang International is 2.22 times more volatile than DATATEC LTD 2. It trades about 0.11 of its potential returns per unit of risk. DATATEC LTD 2 is currently generating about 0.17 per unit of risk. If you would invest  17.00  in Datang International Power on April 21, 2025 and sell it today you would earn a total of  4.00  from holding Datang International Power or generate 23.53% return on investment over 90 days.

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

Datang International Power  vs.  DATATEC LTD 2

Datang International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Datang International Power are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Datang International reported solid returns over the last few months and may actually be approaching a breakup point.

DATATEC LTD 2

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DATATEC LTD 2 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DATATEC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Datang International and DATATEC

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

The idea behind Datang International Power and DATATEC LTD 2 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.