Correlation Between Suzhou Douson and Xian International

Can any of the company-specific risk be diversified away by investing in both Suzhou Douson and Xian International 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 Xian International 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 Xian International Medical, you can compare the effects of market volatilities on Suzhou Douson and Xian International 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 Xian International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suzhou Douson and Xian International.

Diversification Opportunities for Suzhou Douson and Xian International

0.61

Correlation Coefficient

Suzhou Douson  Xian International

Poor diversification

The 3 months correlation between Suzhou and Xian is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Suzhou Douson Drilling and Xian International Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xian International 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 Xian International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xian International has no effect on the direction of Suzhou Douson i.e., Suzhou Douson and Xian International go up and down completely randomly.

Pair Corralation between Suzhou Douson and Xian International

Assuming the 90 days trading horizon Suzhou Douson Drilling is expected to generate 1.23 times more return on investment than Xian International. However, Suzhou Douson is 1.23 times more volatile than Xian International Medical. It trades about 0.01 of its potential returns per unit of risk. Xian International Medical is currently generating about -0.05 per unit of risk. If you would invest  2,567  in Suzhou Douson Drilling on October 9, 2024 and sell it today you would lose (97.00) from holding Suzhou Douson Drilling or give up 3.78% of portfolio value over 90 days.

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

Suzhou Douson Drilling  vs.  Xian International Medical

Suzhou Douson Drilling

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Douson Drilling are ranked lower than 7 (%) 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.

Xian International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xian International Medical 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 Xian International

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

The idea behind Suzhou Douson Drilling and Xian International Medical 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.