Correlation Between Shantou Wanshun and Suzhou Longway

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

By analyzing existing cross correlation between Shantou Wanshun Package and Suzhou Longway Electronic, you can compare the effects of market volatilities on Shantou Wanshun and Suzhou Longway 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 Shantou Wanshun with a short position of Suzhou Longway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shantou Wanshun and Suzhou Longway.

Diversification Opportunities for Shantou Wanshun and Suzhou Longway

-0.08

Correlation Coefficient

Shantou Wanshun  Suzhou Longway

Good diversification

The 3 months correlation between Shantou and Suzhou is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Shantou Wanshun Package and Suzhou Longway Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou Longway Electronic and Shantou Wanshun 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 Shantou Wanshun Package are associated (or correlated) with Suzhou Longway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou Longway Electronic has no effect on the direction of Shantou Wanshun i.e., Shantou Wanshun and Suzhou Longway go up and down completely randomly.

Pair Corralation between Shantou Wanshun and Suzhou Longway

Assuming the 90 days trading horizon Shantou Wanshun Package is expected to under-perform the Suzhou Longway. But the stock apears to be less risky and, when comparing its historical volatility, Shantou Wanshun Package is 1.4 times less risky than Suzhou Longway. The stock trades about -0.04 of its potential returns per unit of risk. The Suzhou Longway Electronic is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,363  in Suzhou Longway Electronic on October 9, 2024 and sell it today you would earn a total of  65.00  from holding Suzhou Longway Electronic or generate 1.93% return on investment over 90 days.

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

Shantou Wanshun Package  vs.  Suzhou Longway Electronic

Shantou Wanshun Package

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shantou Wanshun Package 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 Longway Electronic

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Longway Electronic are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Suzhou Longway may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Shantou Wanshun and Suzhou Longway

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

The idea behind Shantou Wanshun Package and Suzhou Longway Electronic 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..