Correlation Between Cultural Investment and Super-Dragon Engineering

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

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

Diversification Opportunities for Cultural Investment and Super-Dragon Engineering

0.53

Correlation Coefficient

Cultural Investment  Super-Dragon Engineering

Very weak diversification

The 3 months correlation between Cultural and Super-Dragon is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Cultural Investment Holdings and Super Dragon Engineering Plast in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Super-Dragon Engineering and Cultural Investment 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 Cultural Investment Holdings are associated (or correlated) with Super-Dragon Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Super-Dragon Engineering has no effect on the direction of Cultural Investment i.e., Cultural Investment and Super-Dragon Engineering go up and down completely randomly.

Pair Corralation between Cultural Investment and Super-Dragon Engineering

Assuming the 90 days trading horizon Cultural Investment Holdings is expected to under-perform the Super-Dragon Engineering. In addition to that, Cultural Investment is 1.07 times more volatile than Super Dragon Engineering Plastics. It trades about -0.05 of its total potential returns per unit of risk. Super Dragon Engineering Plastics is currently generating about -0.03 per unit of volatility. If you would invest  3,997  in Super Dragon Engineering Plastics on December 2, 2024 and sell it today you would lose (267.00) from holding Super Dragon Engineering Plastics or give up 6.68% of portfolio value over 90 days.

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

Cultural Investment Holdings  vs.  Super Dragon Engineering Plast

Cultural Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cultural Investment Holdings 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.

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.

Pair Trading with Cultural Investment and Super-Dragon Engineering

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

The idea behind Cultural Investment Holdings and Super Dragon Engineering Plastics 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.