Correlation Between Suzhou Douson and Hangzhou Zhongya

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

Diversification Opportunities for Suzhou Douson and Hangzhou Zhongya

0.13

Correlation Coefficient

Suzhou Douson  Hangzhou Zhongya

Average diversification

The 3 months correlation between Suzhou and Hangzhou is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Suzhou Douson Drilling and Hangzhou Zhongya Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Zhongya Mac 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 Hangzhou Zhongya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Zhongya Mac has no effect on the direction of Suzhou Douson i.e., Suzhou Douson and Hangzhou Zhongya go up and down completely randomly.

Pair Corralation between Suzhou Douson and Hangzhou Zhongya

Assuming the 90 days trading horizon Suzhou Douson Drilling is expected to generate 1.27 times more return on investment than Hangzhou Zhongya. However, Suzhou Douson is 1.27 times more volatile than Hangzhou Zhongya Machinery. It trades about 0.17 of its potential returns per unit of risk. Hangzhou Zhongya Machinery is currently generating about -0.02 per unit of risk. If you would invest  1,982  in Suzhou Douson Drilling on October 22, 2024 and sell it today you would earn a total of  804.00  from holding Suzhou Douson Drilling or generate 40.57% return on investment over 90 days.

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

Suzhou Douson Drilling  vs.  Hangzhou Zhongya Machinery

Suzhou Douson Drilling

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Douson Drilling are ranked lower than 13 (%) 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.

Hangzhou Zhongya Mac

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hangzhou Zhongya Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hangzhou Zhongya 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 Hangzhou Zhongya

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

The idea behind Suzhou Douson Drilling and Hangzhou Zhongya Machinery 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.