Correlation Between Shandong Sinoglory and Suzhou Weizhixiang

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

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

Diversification Opportunities for Shandong Sinoglory and Suzhou Weizhixiang

0.87

Correlation Coefficient

Shandong Sinoglory  Suzhou Weizhixiang

Very poor diversification

The 3 months correlation between Shandong and Suzhou is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Sinoglory Health 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 Shandong Sinoglory 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 Shandong Sinoglory Health 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 Shandong Sinoglory i.e., Shandong Sinoglory and Suzhou Weizhixiang go up and down completely randomly.

Pair Corralation between Shandong Sinoglory and Suzhou Weizhixiang

Assuming the 90 days trading horizon Shandong Sinoglory Health is expected to under-perform the Suzhou Weizhixiang. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Sinoglory Health is 2.41 times less risky than Suzhou Weizhixiang. The stock trades about -0.06 of its potential returns per unit of risk. The Suzhou Weizhixiang Food is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,254  in Suzhou Weizhixiang Food on September 26, 2024 and sell it today you would earn a total of  440.00  from holding Suzhou Weizhixiang Food or generate 19.52% return on investment over 90 days.

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

Shandong Sinoglory Health  vs.  Suzhou Weizhixiang Food

Shandong Sinoglory Health

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Sinoglory Health are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Sinoglory may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Suzhou Weizhixiang Food

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Weizhixiang Food are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Suzhou Weizhixiang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shandong Sinoglory and Suzhou Weizhixiang

The main advantage of trading using opposite Shandong Sinoglory and Suzhou Weizhixiang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shandong Sinoglory 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 Shandong Sinoglory Health 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.