Correlation Between Suofeiya Home and Nanjing OLO

Can any of the company-specific risk be diversified away by investing in both Suofeiya Home and Nanjing OLO 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 Suofeiya Home and Nanjing OLO into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Suofeiya Home Collection and Nanjing OLO Home, you can compare the effects of market volatilities on Suofeiya Home and Nanjing OLO 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 Suofeiya Home with a short position of Nanjing OLO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suofeiya Home and Nanjing OLO.

Diversification Opportunities for Suofeiya Home and Nanjing OLO

0.65

Correlation Coefficient

Suofeiya Home  Nanjing OLO

Poor diversification

The 3 months correlation between Suofeiya and Nanjing is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Suofeiya Home Collection and Nanjing OLO Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanjing OLO Home and Suofeiya Home 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 Suofeiya Home Collection are associated (or correlated) with Nanjing OLO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanjing OLO Home has no effect on the direction of Suofeiya Home i.e., Suofeiya Home and Nanjing OLO go up and down completely randomly.

Pair Corralation between Suofeiya Home and Nanjing OLO

Assuming the 90 days trading horizon Suofeiya Home Collection is expected to generate 0.79 times more return on investment than Nanjing OLO. However, Suofeiya Home Collection is 1.26 times less risky than Nanjing OLO. It trades about 0.06 of its potential returns per unit of risk. Nanjing OLO Home is currently generating about 0.04 per unit of risk. If you would invest  1,645  in Suofeiya Home Collection on September 24, 2024 and sell it today you would earn a total of  48.00  from holding Suofeiya Home Collection or generate 2.92% return on investment over 90 days.

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

Suofeiya Home Collection  vs.  Nanjing OLO Home

Suofeiya Home Collection

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Suofeiya Home Collection are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Suofeiya Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Nanjing OLO Home

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nanjing OLO Home are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanjing OLO sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Suofeiya Home and Nanjing OLO

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

The idea behind Suofeiya Home Collection and Nanjing OLO Home 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.