Correlation Between Suzhou Douson and Huaxi Securities

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

Diversification Opportunities for Suzhou Douson and Huaxi Securities

0.65

Correlation Coefficient

Suzhou Douson  Huaxi Securities

Poor diversification

The 3 months correlation between Suzhou and Huaxi is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Suzhou Douson Drilling and Huaxi Securities Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaxi Securities 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 Huaxi Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaxi Securities has no effect on the direction of Suzhou Douson i.e., Suzhou Douson and Huaxi Securities go up and down completely randomly.

Pair Corralation between Suzhou Douson and Huaxi Securities

Assuming the 90 days trading horizon Suzhou Douson is expected to generate 2.24 times less return on investment than Huaxi Securities. In addition to that, Suzhou Douson is 1.56 times more volatile than Huaxi Securities Co. It trades about 0.01 of its total potential returns per unit of risk. Huaxi Securities Co is currently generating about 0.02 per unit of volatility. If you would invest  775.00  in Huaxi Securities Co on September 29, 2024 and sell it today you would earn a total of  94.00  from holding Huaxi Securities Co or generate 12.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Suzhou Douson Drilling  vs.  Huaxi Securities Co

Suzhou Douson Drilling

Risk-Adjusted Performance

6 of 100

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.

Huaxi Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huaxi Securities Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Huaxi Securities is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Suzhou Douson and Huaxi Securities

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

The idea behind Suzhou Douson Drilling and Huaxi Securities 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.