Correlation Between Guangdong Shenglu and Suzhou Dongshan

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

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

Diversification Opportunities for Guangdong Shenglu and Suzhou Dongshan

-0.31

Correlation Coefficient

Guangdong Shenglu  Suzhou Dongshan

Very good diversification

The 3 months correlation between Guangdong and Suzhou is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Shenglu Telecommunic and Suzhou Dongshan Precision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou Dongshan Precision and Guangdong Shenglu 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 Guangdong Shenglu Telecommunication are associated (or correlated) with Suzhou Dongshan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou Dongshan Precision has no effect on the direction of Guangdong Shenglu i.e., Guangdong Shenglu and Suzhou Dongshan go up and down completely randomly.

Pair Corralation between Guangdong Shenglu and Suzhou Dongshan

Assuming the 90 days trading horizon Guangdong Shenglu Telecommunication is expected to under-perform the Suzhou Dongshan. But the stock apears to be less risky and, when comparing its historical volatility, Guangdong Shenglu Telecommunication is 1.32 times less risky than Suzhou Dongshan. The stock trades about -0.07 of its potential returns per unit of risk. The Suzhou Dongshan Precision is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,527  in Suzhou Dongshan Precision on October 25, 2024 and sell it today you would earn a total of  840.00  from holding Suzhou Dongshan Precision or generate 33.24% return on investment over 90 days.

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

Guangdong Shenglu Telecommunic  vs.  Suzhou Dongshan Precision

Guangdong Shenglu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guangdong Shenglu Telecommunication 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.

Suzhou Dongshan Precision

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Dongshan Precision are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Suzhou Dongshan sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangdong Shenglu and Suzhou Dongshan

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

The idea behind Guangdong Shenglu Telecommunication and Suzhou Dongshan 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.