Correlation Between CSSC Offshore and Soochow Securities

Can any of the company-specific risk be diversified away by investing in both CSSC Offshore and Soochow Securities 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 CSSC Offshore and Soochow Securities into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CSSC Offshore Marine and Soochow Securities Co, you can compare the effects of market volatilities on CSSC Offshore and Soochow Securities 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 CSSC Offshore with a short position of Soochow Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSSC Offshore and Soochow Securities.

Diversification Opportunities for CSSC Offshore and Soochow Securities

0.44

Correlation Coefficient

CSSC Offshore  Soochow Securities

Very weak diversification

The 3 months correlation between CSSC and Soochow is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding CSSC Offshore Marine and Soochow Securities Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soochow Securities and CSSC Offshore 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 CSSC Offshore Marine are associated (or correlated) with Soochow Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soochow Securities has no effect on the direction of CSSC Offshore i.e., CSSC Offshore and Soochow Securities go up and down completely randomly.

Pair Corralation between CSSC Offshore and Soochow Securities

Assuming the 90 days trading horizon CSSC Offshore Marine is expected to under-perform the Soochow Securities. But the stock apears to be less risky and, when comparing its historical volatility, CSSC Offshore Marine is 1.1 times less risky than Soochow Securities. The stock trades about -0.13 of its potential returns per unit of risk. The Soochow Securities Co is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  811.00  in Soochow Securities Co on September 21, 2024 and sell it today you would lose (4.00) from holding Soochow Securities Co or give up 0.49% of portfolio value over 90 days.

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

CSSC Offshore Marine  vs.  Soochow Securities Co

CSSC Offshore Marine

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CSSC Offshore Marine are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CSSC Offshore may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Soochow Securities

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Soochow Securities Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Soochow Securities sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CSSC Offshore and Soochow Securities

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

The idea behind CSSC Offshore Marine and Soochow Securities 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.