Correlation Between Lepu Medical and Suzhou Douson

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

By analyzing existing cross correlation between Lepu Medical Tech and Suzhou Douson Drilling, you can compare the effects of market volatilities on Lepu Medical and Suzhou Douson 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 Lepu Medical with a short position of Suzhou Douson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lepu Medical and Suzhou Douson.

Diversification Opportunities for Lepu Medical and Suzhou Douson

0.21

Correlation Coefficient

Lepu Medical  Suzhou Douson

Modest diversification

The 3 months correlation between Lepu and Suzhou is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Lepu Medical Tech and Suzhou Douson Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou Douson Drilling and Lepu Medical 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 Lepu Medical Tech are associated (or correlated) with Suzhou Douson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou Douson Drilling has no effect on the direction of Lepu Medical i.e., Lepu Medical and Suzhou Douson go up and down completely randomly.

Pair Corralation between Lepu Medical and Suzhou Douson

Assuming the 90 days trading horizon Lepu Medical Tech is expected to under-perform the Suzhou Douson. In addition to that, Lepu Medical is 1.03 times more volatile than Suzhou Douson Drilling. It trades about -0.02 of its total potential returns per unit of risk. Suzhou Douson Drilling is currently generating about 0.1 per unit of volatility. If you would invest  1,762  in Suzhou Douson Drilling on October 4, 2024 and sell it today you would earn a total of  763.00  from holding Suzhou Douson Drilling or generate 43.3% return on investment over 90 days.

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

Lepu Medical Tech  vs.  Suzhou Douson Drilling

Lepu Medical Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lepu Medical Tech 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 Douson Drilling

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Douson Drilling are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Suzhou Douson sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lepu Medical and Suzhou Douson

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

The idea behind Lepu Medical Tech and Suzhou Douson Drilling 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.