Correlation Between Bank of Suzhou and GRIPM Advanced

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

By analyzing existing cross correlation between Bank of Suzhou and GRIPM Advanced Materials, you can compare the effects of market volatilities on Bank of Suzhou and GRIPM Advanced 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 Bank of Suzhou with a short position of GRIPM Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Suzhou and GRIPM Advanced.

Diversification Opportunities for Bank of Suzhou and GRIPM Advanced

0.64

Correlation Coefficient

Bank of Suzhou  GRIPM Advanced

Poor diversification

The 3 months correlation between Bank and GRIPM is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Suzhou and GRIPM Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GRIPM Advanced Materials and Bank of Suzhou 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 Bank of Suzhou are associated (or correlated) with GRIPM Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GRIPM Advanced Materials has no effect on the direction of Bank of Suzhou i.e., Bank of Suzhou and GRIPM Advanced go up and down completely randomly.

Pair Corralation between Bank of Suzhou and GRIPM Advanced

Assuming the 90 days trading horizon Bank of Suzhou is expected to generate 1.4 times less return on investment than GRIPM Advanced. But when comparing it to its historical volatility, Bank of Suzhou is 2.17 times less risky than GRIPM Advanced. It trades about 0.09 of its potential returns per unit of risk. GRIPM Advanced Materials is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,086  in GRIPM Advanced Materials on September 27, 2024 and sell it today you would earn a total of  291.00  from holding GRIPM Advanced Materials or generate 9.43% return on investment over 90 days.

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

Bank of Suzhou  vs.  GRIPM Advanced Materials

Bank of Suzhou

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Suzhou are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bank of Suzhou may actually be approaching a critical reversion point that can send shares even higher in January 2025.

GRIPM Advanced Materials

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GRIPM Advanced Materials are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GRIPM Advanced sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of Suzhou and GRIPM Advanced

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

The idea behind Bank of Suzhou and GRIPM Advanced Materials 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.