Correlation Between China Reform and Suzhou Cheersson

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

By analyzing existing cross correlation between China Reform Health and Suzhou Cheersson Precision, you can compare the effects of market volatilities on China Reform and Suzhou Cheersson 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 China Reform with a short position of Suzhou Cheersson. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Reform and Suzhou Cheersson.

Diversification Opportunities for China Reform and Suzhou Cheersson

0.23

Correlation Coefficient

China Reform  Suzhou Cheersson

Modest diversification

The 3 months correlation between China and Suzhou is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding China Reform Health and Suzhou Cheersson Precision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou Cheersson Pre and China Reform 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 China Reform Health are associated (or correlated) with Suzhou Cheersson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou Cheersson Pre has no effect on the direction of China Reform i.e., China Reform and Suzhou Cheersson go up and down completely randomly.

Pair Corralation between China Reform and Suzhou Cheersson

Assuming the 90 days trading horizon China Reform Health is expected to generate 1.45 times more return on investment than Suzhou Cheersson. However, China Reform is 1.45 times more volatile than Suzhou Cheersson Precision. It trades about 0.02 of its potential returns per unit of risk. Suzhou Cheersson Precision is currently generating about -0.07 per unit of risk. If you would invest  1,027  in China Reform Health on October 6, 2024 and sell it today you would lose (21.00) from holding China Reform Health or give up 2.04% of portfolio value over 90 days.

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

China Reform Health  vs.  Suzhou Cheersson Precision

China Reform Health

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Reform Health are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, China Reform is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Suzhou Cheersson Pre

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suzhou Cheersson Precision has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with China Reform and Suzhou Cheersson

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

The idea behind China Reform Health and Suzhou Cheersson Precision 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.