Correlation Between Suzhou TFC and Shenzhen Clou

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

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

Diversification Opportunities for Suzhou TFC and Shenzhen Clou

-0.16

Correlation Coefficient

Suzhou TFC  Shenzhen Clou

Good diversification

The 3 months correlation between Suzhou and Shenzhen is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Suzhou TFC Optical and Shenzhen Clou Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Clou Electronics and Suzhou TFC 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 Suzhou TFC Optical are associated (or correlated) with Shenzhen Clou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Clou Electronics has no effect on the direction of Suzhou TFC i.e., Suzhou TFC and Shenzhen Clou go up and down completely randomly.

Pair Corralation between Suzhou TFC and Shenzhen Clou

Assuming the 90 days trading horizon Suzhou TFC Optical is expected to generate 2.09 times more return on investment than Shenzhen Clou. However, Suzhou TFC is 2.09 times more volatile than Shenzhen Clou Electronics. It trades about 0.1 of its potential returns per unit of risk. Shenzhen Clou Electronics is currently generating about -0.31 per unit of risk. If you would invest  9,867  in Suzhou TFC Optical on October 21, 2024 and sell it today you would earn a total of  993.00  from holding Suzhou TFC Optical or generate 10.06% return on investment over 90 days.

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

Suzhou TFC Optical  vs.  Shenzhen Clou Electronics

Suzhou TFC Optical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suzhou TFC Optical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Suzhou TFC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shenzhen Clou Electronics

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Suzhou TFC and Shenzhen Clou

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

The idea behind Suzhou TFC Optical and Shenzhen Clou Electronics 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.