Correlation Between Suzhou Douson and Strait Innovation

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

Diversification Opportunities for Suzhou Douson and Strait Innovation

0.92

Correlation Coefficient

Suzhou Douson  Strait Innovation

Almost no diversification

The 3 months correlation between Suzhou and Strait is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Suzhou Douson Drilling and Strait Innovation Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strait Innovation 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 Strait Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strait Innovation has no effect on the direction of Suzhou Douson i.e., Suzhou Douson and Strait Innovation go up and down completely randomly.

Pair Corralation between Suzhou Douson and Strait Innovation

Assuming the 90 days trading horizon Suzhou Douson Drilling is expected to generate 1.2 times more return on investment than Strait Innovation. However, Suzhou Douson is 1.2 times more volatile than Strait Innovation Internet. It trades about 0.14 of its potential returns per unit of risk. Strait Innovation Internet is currently generating about 0.09 per unit of risk. If you would invest  2,341  in Suzhou Douson Drilling on September 22, 2024 and sell it today you would earn a total of  240.00  from holding Suzhou Douson Drilling or generate 10.25% return on investment over 90 days.

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

Suzhou Douson Drilling  vs.  Strait Innovation Internet

Suzhou Douson Drilling

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Douson Drilling are ranked lower than 16 (%) 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.

Strait Innovation

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Strait Innovation Internet are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Strait Innovation sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Suzhou Douson and Strait Innovation

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

The idea behind Suzhou Douson Drilling and Strait Innovation Internet 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.