Correlation Between China Satellite and Suofeiya Home

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

By analyzing existing cross correlation between China Satellite Communications and Suofeiya Home Collection, you can compare the effects of market volatilities on China Satellite and Suofeiya Home 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 Satellite with a short position of Suofeiya Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Satellite and Suofeiya Home.

Diversification Opportunities for China Satellite and Suofeiya Home

-0.02

Correlation Coefficient

China Satellite  Suofeiya Home

Good diversification

The 3 months correlation between China and Suofeiya is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding China Satellite Communications and Suofeiya Home Collection in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suofeiya Home Collection and China Satellite 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 Satellite Communications are associated (or correlated) with Suofeiya Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suofeiya Home Collection has no effect on the direction of China Satellite i.e., China Satellite and Suofeiya Home go up and down completely randomly.

Pair Corralation between China Satellite and Suofeiya Home

Assuming the 90 days trading horizon China Satellite Communications is expected to under-perform the Suofeiya Home. In addition to that, China Satellite is 1.21 times more volatile than Suofeiya Home Collection. It trades about -0.03 of its total potential returns per unit of risk. Suofeiya Home Collection is currently generating about -0.04 per unit of volatility. If you would invest  1,645  in Suofeiya Home Collection on October 25, 2024 and sell it today you would lose (89.00) from holding Suofeiya Home Collection or give up 5.41% of portfolio value over 90 days.

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

China Satellite Communications  vs.  Suofeiya Home Collection

China Satellite Comm

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Satellite Communications are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Satellite sustained solid returns over the last few months and may actually be approaching a breakup point.

Suofeiya Home Collection

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suofeiya Home Collection has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with China Satellite and Suofeiya Home

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

The idea behind China Satellite Communications and Suofeiya Home Collection 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.