Correlation Between Super-Dragon Engineering and Xiandai Investment

Can any of the company-specific risk be diversified away by investing in both Super-Dragon Engineering and Xiandai Investment 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 Super-Dragon Engineering and Xiandai Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Super Dragon Engineering Plastics and Xiandai Investment Co, you can compare the effects of market volatilities on Super-Dragon Engineering and Xiandai Investment 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 Super-Dragon Engineering with a short position of Xiandai Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Super-Dragon Engineering and Xiandai Investment.

Diversification Opportunities for Super-Dragon Engineering and Xiandai Investment

0.63

Correlation Coefficient

Super-Dragon Engineering  Xiandai Investment

Poor diversification

The 3 months correlation between Super-Dragon and Xiandai is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Super Dragon Engineering Plast and Xiandai Investment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiandai Investment and Super-Dragon Engineering 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 Super Dragon Engineering Plastics are associated (or correlated) with Xiandai Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiandai Investment has no effect on the direction of Super-Dragon Engineering i.e., Super-Dragon Engineering and Xiandai Investment go up and down completely randomly.

Pair Corralation between Super-Dragon Engineering and Xiandai Investment

Assuming the 90 days trading horizon Super Dragon Engineering Plastics is expected to generate 2.72 times more return on investment than Xiandai Investment. However, Super-Dragon Engineering is 2.72 times more volatile than Xiandai Investment Co. It trades about 0.22 of its potential returns per unit of risk. Xiandai Investment Co is currently generating about -0.19 per unit of risk. If you would invest  3,613  in Super Dragon Engineering Plastics on December 10, 2024 and sell it today you would earn a total of  363.00  from holding Super Dragon Engineering Plastics or generate 10.05% return on investment over 90 days.

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

Super Dragon Engineering Plast  vs.  Xiandai Investment Co

Super-Dragon Engineering

Risk-Adjusted Performance

Very Weak

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

Xiandai Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xiandai Investment Co 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Super-Dragon Engineering and Xiandai Investment

The main advantage of trading using opposite Super-Dragon Engineering and Xiandai Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Super-Dragon Engineering position performs unexpectedly, Xiandai Investment 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 Xiandai Investment will offset losses from the drop in Xiandai Investment's long position.

The idea behind Super Dragon Engineering Plastics and Xiandai Investment Co 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.