Correlation Between Changshu Ruite and Suzhou Industrial

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

By analyzing existing cross correlation between Changshu Ruite Electric and Suzhou Industrial Park, you can compare the effects of market volatilities on Changshu Ruite and Suzhou Industrial 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 Changshu Ruite with a short position of Suzhou Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changshu Ruite and Suzhou Industrial.

Diversification Opportunities for Changshu Ruite and Suzhou Industrial

0.48

Correlation Coefficient

Changshu Ruite  Suzhou Industrial

Very weak diversification

The 3 months correlation between Changshu and Suzhou is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Changshu Ruite Electric and Suzhou Industrial Park in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou Industrial Park and Changshu Ruite 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 Changshu Ruite Electric are associated (or correlated) with Suzhou Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou Industrial Park has no effect on the direction of Changshu Ruite i.e., Changshu Ruite and Suzhou Industrial go up and down completely randomly.

Pair Corralation between Changshu Ruite and Suzhou Industrial

Assuming the 90 days trading horizon Changshu Ruite Electric is expected to under-perform the Suzhou Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Changshu Ruite Electric is 3.11 times less risky than Suzhou Industrial. The stock trades about -0.2 of its potential returns per unit of risk. The Suzhou Industrial Park is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,017  in Suzhou Industrial Park on October 23, 2024 and sell it today you would lose (105.00) from holding Suzhou Industrial Park or give up 10.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Changshu Ruite Electric  vs.  Suzhou Industrial Park

Changshu Ruite Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Changshu Ruite Electric 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 Industrial Park

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Changshu Ruite and Suzhou Industrial

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

The idea behind Changshu Ruite Electric and Suzhou Industrial Park 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.