Correlation Between Chongqing Changan and Suzhou Cheersson

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

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

Diversification Opportunities for Chongqing Changan and Suzhou Cheersson

0.32

Correlation Coefficient

Chongqing Changan  Suzhou Cheersson

Weak diversification

The 3 months correlation between Chongqing and Suzhou is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Changan Automobile 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 Chongqing Changan 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 Chongqing Changan Automobile 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 Chongqing Changan i.e., Chongqing Changan and Suzhou Cheersson go up and down completely randomly.

Pair Corralation between Chongqing Changan and Suzhou Cheersson

Assuming the 90 days trading horizon Chongqing Changan Automobile is expected to under-perform the Suzhou Cheersson. But the stock apears to be less risky and, when comparing its historical volatility, Chongqing Changan Automobile is 1.38 times less risky than Suzhou Cheersson. The stock trades about -0.08 of its potential returns per unit of risk. The Suzhou Cheersson Precision is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,277  in Suzhou Cheersson Precision on December 26, 2024 and sell it today you would lose (156.00) from holding Suzhou Cheersson Precision or give up 6.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Chongqing Changan Automobile  vs.  Suzhou Cheersson Precision

Chongqing Changan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chongqing Changan Automobile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Suzhou Cheersson Pre

Risk-Adjusted Performance

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 somewhat strong basic indicators, Suzhou Cheersson is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chongqing Changan and Suzhou Cheersson

The main advantage of trading using opposite Chongqing Changan and Suzhou Cheersson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chongqing Changan 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 Chongqing Changan Automobile 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.