Correlation Between Shenzhen RoadRover and Suzhou Dongshan

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

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

Diversification Opportunities for Shenzhen RoadRover and Suzhou Dongshan

-0.55

Correlation Coefficient

Shenzhen RoadRover  Suzhou Dongshan

Excellent diversification

The 3 months correlation between Shenzhen and Suzhou is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen RoadRover Technology 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 Shenzhen RoadRover 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 Shenzhen RoadRover Technology 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 Shenzhen RoadRover i.e., Shenzhen RoadRover and Suzhou Dongshan go up and down completely randomly.

Pair Corralation between Shenzhen RoadRover and Suzhou Dongshan

Assuming the 90 days trading horizon Shenzhen RoadRover Technology is expected to generate 0.62 times more return on investment than Suzhou Dongshan. However, Shenzhen RoadRover Technology is 1.61 times less risky than Suzhou Dongshan. It trades about 0.0 of its potential returns per unit of risk. Suzhou Dongshan Precision is currently generating about -0.12 per unit of risk. If you would invest  2,428  in Shenzhen RoadRover Technology on December 10, 2024 and sell it today you would lose (11.00) from holding Shenzhen RoadRover Technology or give up 0.45% of portfolio value over 90 days.

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

Shenzhen RoadRover Technology  vs.  Suzhou Dongshan Precision

Shenzhen RoadRover

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen RoadRover Technology 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 Dongshan Precision

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Dongshan Precision are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Suzhou Dongshan may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Shenzhen RoadRover and Suzhou Dongshan

The main advantage of trading using opposite Shenzhen RoadRover and Suzhou Dongshan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenzhen RoadRover 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 Shenzhen RoadRover Technology 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.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.