Correlation Between CEZ A and China Datang

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

By analyzing existing cross correlation between CEZ a s and China Datang, you can compare the effects of market volatilities on CEZ A and China Datang 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 CEZ A with a short position of China Datang. Check out your portfolio center. Please also check ongoing floating volatility patterns of CEZ A and China Datang.

Diversification Opportunities for CEZ A and China Datang

0.72

Correlation Coefficient

CEZ A  China Datang

Poor diversification

The 3 months correlation between CEZ and China is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding CEZ a s and China Datang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Datang and CEZ A 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 CEZ a s are associated (or correlated) with China Datang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Datang has no effect on the direction of CEZ A i.e., CEZ A and China Datang go up and down completely randomly.

Pair Corralation between CEZ A and China Datang

Assuming the 90 days horizon CEZ A is expected to generate 1.11 times less return on investment than China Datang. But when comparing it to its historical volatility, CEZ a s is 1.93 times less risky than China Datang. It trades about 0.16 of its potential returns per unit of risk. China Datang is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  23.00  in China Datang on April 24, 2025 and sell it today you would earn a total of  3.00  from holding China Datang or generate 13.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

CEZ a s  vs.  China Datang

CEZ a s

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CEZ a s are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, CEZ A reported solid returns over the last few months and may actually be approaching a breakup point.

China Datang

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Datang are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Datang reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CEZ A and China Datang

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

The idea behind CEZ a s and China Datang 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.