Correlation Between China State and Suzhou Weizhixiang

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

By analyzing existing cross correlation between China State Construction and Suzhou Weizhixiang Food, you can compare the effects of market volatilities on China State and Suzhou Weizhixiang 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 China State with a short position of Suzhou Weizhixiang. Check out your portfolio center. Please also check ongoing floating volatility patterns of China State and Suzhou Weizhixiang.

Diversification Opportunities for China State and Suzhou Weizhixiang

-0.37

Correlation Coefficient

China State  Suzhou Weizhixiang

Very good diversification

The 3 months correlation between China and Suzhou is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding China State Construction and Suzhou Weizhixiang Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou Weizhixiang Food and China State 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 China State Construction are associated (or correlated) with Suzhou Weizhixiang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou Weizhixiang Food has no effect on the direction of China State i.e., China State and Suzhou Weizhixiang go up and down completely randomly.

Pair Corralation between China State and Suzhou Weizhixiang

Assuming the 90 days trading horizon China State Construction is expected to under-perform the Suzhou Weizhixiang. But the stock apears to be less risky and, when comparing its historical volatility, China State Construction is 1.58 times less risky than Suzhou Weizhixiang. The stock trades about -0.05 of its potential returns per unit of risk. The Suzhou Weizhixiang Food is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,359  in Suzhou Weizhixiang Food on October 6, 2024 and sell it today you would lose (13.00) from holding Suzhou Weizhixiang Food or give up 0.55% of portfolio value over 90 days.

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

China State Construction  vs.  Suzhou Weizhixiang Food

China State Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China State Construction 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.

Suzhou Weizhixiang Food

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Weizhixiang Food are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Suzhou Weizhixiang is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China State and Suzhou Weizhixiang

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

The idea behind China State Construction and Suzhou Weizhixiang Food 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.