Correlation Between Soochow Securities and Nanjing OLO

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

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

Diversification Opportunities for Soochow Securities and Nanjing OLO

0.78

Correlation Coefficient

Soochow Securities  Nanjing OLO

Poor diversification

The 3 months correlation between Soochow and Nanjing is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Soochow Securities Co and Nanjing OLO Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanjing OLO Home and Soochow Securities 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 Soochow Securities Co are associated (or correlated) with Nanjing OLO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanjing OLO Home has no effect on the direction of Soochow Securities i.e., Soochow Securities and Nanjing OLO go up and down completely randomly.

Pair Corralation between Soochow Securities and Nanjing OLO

Assuming the 90 days trading horizon Soochow Securities Co is expected to under-perform the Nanjing OLO. But the stock apears to be less risky and, when comparing its historical volatility, Soochow Securities Co is 2.64 times less risky than Nanjing OLO. The stock trades about -0.01 of its potential returns per unit of risk. The Nanjing OLO Home is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  622.00  in Nanjing OLO Home on September 20, 2024 and sell it today you would earn a total of  43.00  from holding Nanjing OLO Home or generate 6.91% return on investment over 90 days.

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

Soochow Securities Co  vs.  Nanjing OLO Home

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.

Nanjing OLO Home

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Soochow Securities and Nanjing OLO

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

The idea behind Soochow Securities Co and Nanjing OLO Home 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.