Correlation Between Dr Peng and Suzhou Douson

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

By analyzing existing cross correlation between Dr Peng Telecom and Suzhou Douson Drilling, you can compare the effects of market volatilities on Dr Peng and Suzhou Douson 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 Dr Peng with a short position of Suzhou Douson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dr Peng and Suzhou Douson.

Diversification Opportunities for Dr Peng and Suzhou Douson

0.66

Correlation Coefficient

Dr Peng  Suzhou Douson

Poor diversification

The 3 months correlation between 600804 and Suzhou is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dr Peng Telecom and Suzhou Douson Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou Douson Drilling and Dr Peng 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 Dr Peng Telecom are associated (or correlated) with Suzhou Douson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou Douson Drilling has no effect on the direction of Dr Peng i.e., Dr Peng and Suzhou Douson go up and down completely randomly.

Pair Corralation between Dr Peng and Suzhou Douson

Assuming the 90 days trading horizon Dr Peng is expected to generate 1.03 times less return on investment than Suzhou Douson. In addition to that, Dr Peng is 1.11 times more volatile than Suzhou Douson Drilling. It trades about 0.12 of its total potential returns per unit of risk. Suzhou Douson Drilling is currently generating about 0.14 per unit of volatility. If you would invest  1,942  in Suzhou Douson Drilling on October 24, 2024 and sell it today you would earn a total of  633.00  from holding Suzhou Douson Drilling or generate 32.6% return on investment over 90 days.

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

Dr Peng Telecom  vs.  Suzhou Douson Drilling

Dr Peng Telecom

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dr Peng Telecom are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dr Peng sustained solid returns over the last few months and may actually be approaching a breakup point.

Suzhou Douson Drilling

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Douson Drilling are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Suzhou Douson sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dr Peng and Suzhou Douson

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

The idea behind Dr Peng Telecom and Suzhou Douson Drilling 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..