Correlation Between Suzhou Douson and China Vanke

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

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

Diversification Opportunities for Suzhou Douson and China Vanke

-0.17

Correlation Coefficient

Suzhou Douson  China Vanke

Good diversification

The 3 months correlation between Suzhou and China is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Suzhou Douson Drilling and China Vanke Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Vanke and Suzhou Douson 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 Suzhou Douson Drilling are associated (or correlated) with China Vanke. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Vanke has no effect on the direction of Suzhou Douson i.e., Suzhou Douson and China Vanke go up and down completely randomly.

Pair Corralation between Suzhou Douson and China Vanke

Assuming the 90 days trading horizon Suzhou Douson is expected to generate 1.14 times less return on investment than China Vanke. In addition to that, Suzhou Douson is 1.73 times more volatile than China Vanke Co. It trades about 0.11 of its total potential returns per unit of risk. China Vanke Co is currently generating about 0.21 per unit of volatility. If you would invest  697.00  in China Vanke Co on December 4, 2024 and sell it today you would earn a total of  82.00  from holding China Vanke Co or generate 11.76% return on investment over 90 days.

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

Suzhou Douson Drilling  vs.  China Vanke Co

Suzhou Douson Drilling

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Douson Drilling are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Suzhou Douson sustained solid returns over the last few months and may actually be approaching a breakup point.

China Vanke

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Vanke Co 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.

Pair Trading with Suzhou Douson and China Vanke

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

The idea behind Suzhou Douson Drilling and China Vanke Co 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.