Correlation Between Changzhou Almaden and Suzhou Oriental

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

By analyzing existing cross correlation between Changzhou Almaden Co and Suzhou Oriental Semiconductor, you can compare the effects of market volatilities on Changzhou Almaden and Suzhou Oriental 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 Changzhou Almaden with a short position of Suzhou Oriental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changzhou Almaden and Suzhou Oriental.

Diversification Opportunities for Changzhou Almaden and Suzhou Oriental

0.6

Correlation Coefficient

Changzhou Almaden  Suzhou Oriental

Poor diversification

The 3 months correlation between Changzhou and Suzhou is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Changzhou Almaden Co and Suzhou Oriental Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou Oriental Semi and Changzhou Almaden 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 Changzhou Almaden Co are associated (or correlated) with Suzhou Oriental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou Oriental Semi has no effect on the direction of Changzhou Almaden i.e., Changzhou Almaden and Suzhou Oriental go up and down completely randomly.

Pair Corralation between Changzhou Almaden and Suzhou Oriental

Assuming the 90 days trading horizon Changzhou Almaden Co is expected to under-perform the Suzhou Oriental. But the stock apears to be less risky and, when comparing its historical volatility, Changzhou Almaden Co is 1.55 times less risky than Suzhou Oriental. The stock trades about -0.13 of its potential returns per unit of risk. The Suzhou Oriental Semiconductor is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  4,901  in Suzhou Oriental Semiconductor on October 7, 2024 and sell it today you would lose (1,051) from holding Suzhou Oriental Semiconductor or give up 21.44% of portfolio value over 90 days.

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

Changzhou Almaden Co  vs.  Suzhou Oriental Semiconductor

Changzhou Almaden

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Changzhou Almaden Co 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 Oriental Semi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suzhou Oriental Semiconductor 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 Changzhou Almaden and Suzhou Oriental

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

The idea behind Changzhou Almaden Co and Suzhou Oriental Semiconductor 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.