Correlation Between Mengtian Home and Suzhou Oriental

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

By analyzing existing cross correlation between Mengtian Home Group and Suzhou Oriental Semiconductor, you can compare the effects of market volatilities on Mengtian Home and Suzhou Oriental 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 Mengtian Home with a short position of Suzhou Oriental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mengtian Home and Suzhou Oriental.

Diversification Opportunities for Mengtian Home and Suzhou Oriental

-0.08

Correlation Coefficient

Mengtian Home  Suzhou Oriental

Good diversification

The 3 months correlation between Mengtian and Suzhou is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Mengtian Home Group and Suzhou Oriental Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou Oriental Semi and Mengtian Home 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 Mengtian Home Group are associated (or correlated) with Suzhou Oriental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou Oriental Semi has no effect on the direction of Mengtian Home i.e., Mengtian Home and Suzhou Oriental go up and down completely randomly.

Pair Corralation between Mengtian Home and Suzhou Oriental

Assuming the 90 days trading horizon Mengtian Home Group is expected to generate 1.99 times more return on investment than Suzhou Oriental. However, Mengtian Home is 1.99 times more volatile than Suzhou Oriental Semiconductor. It trades about 0.05 of its potential returns per unit of risk. Suzhou Oriental Semiconductor is currently generating about -0.37 per unit of risk. If you would invest  1,093  in Mengtian Home Group on October 8, 2024 and sell it today you would earn a total of  26.00  from holding Mengtian Home Group or generate 2.38% return on investment over 90 days.

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

Mengtian Home Group  vs.  Suzhou Oriental Semiconductor

Mengtian Home Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mengtian Home Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Mengtian Home is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Suzhou Oriental Semi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suzhou Oriental Semiconductor 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 Mengtian Home and Suzhou Oriental

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

The idea behind Mengtian Home Group and Suzhou Oriental Semiconductor 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.