Correlation Between Dunxin Financial and Lufax Holding

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

By analyzing existing cross correlation between Dunxin Financial Holdings and Lufax Holding, you can compare the effects of market volatilities on Dunxin Financial and Lufax Holding 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 Dunxin Financial with a short position of Lufax Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dunxin Financial and Lufax Holding.

Diversification Opportunities for Dunxin Financial and Lufax Holding

-0.68

Correlation Coefficient

Dunxin Financial  Lufax Holding

Excellent diversification

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

Pair Corralation between Dunxin Financial and Lufax Holding

Considering the 90-day investment horizon Dunxin Financial Holdings is expected to under-perform the Lufax Holding. In addition to that, Dunxin Financial is 1.43 times more volatile than Lufax Holding. It trades about -0.01 of its total potential returns per unit of risk. Lufax Holding is currently generating about 0.13 per unit of volatility. If you would invest  292.00  in Lufax Holding on March 4, 2024 and sell it today you would earn a total of  156.00  from holding Lufax Holding or generate 53.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Dunxin Financial Holdings  vs.  Lufax Holding

Dunxin Financial Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dunxin Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Dunxin Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Lufax Holding

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lufax Holding are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Lufax Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dunxin Financial and Lufax Holding

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

The idea behind Dunxin Financial Holdings and Lufax Holding 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.