Correlation Between Suzhou Douson and Super-Dragon Engineering

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

Diversification Opportunities for Suzhou Douson and Super-Dragon Engineering

0.77

Correlation Coefficient

Suzhou Douson  Super-Dragon Engineering

Poor diversification

The 3 months correlation between Suzhou and Super-Dragon is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Suzhou Douson Drilling and Super Dragon Engineering Plast in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Super-Dragon Engineering 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 Super-Dragon Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Super-Dragon Engineering has no effect on the direction of Suzhou Douson i.e., Suzhou Douson and Super-Dragon Engineering go up and down completely randomly.

Pair Corralation between Suzhou Douson and Super-Dragon Engineering

Assuming the 90 days trading horizon Suzhou Douson Drilling is expected to generate 1.76 times more return on investment than Super-Dragon Engineering. However, Suzhou Douson is 1.76 times more volatile than Super Dragon Engineering Plastics. It trades about 0.13 of its potential returns per unit of risk. Super Dragon Engineering Plastics is currently generating about 0.06 per unit of risk. If you would invest  2,598  in Suzhou Douson Drilling on December 30, 2024 and sell it today you would earn a total of  792.00  from holding Suzhou Douson Drilling or generate 30.48% return on investment over 90 days.

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

Suzhou Douson Drilling  vs.  Super Dragon Engineering Plast

Suzhou Douson Drilling

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Douson Drilling are ranked lower than 10 (%) 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.

Super-Dragon Engineering

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Super Dragon Engineering Plastics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Super-Dragon Engineering may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Suzhou Douson and Super-Dragon Engineering

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

The idea behind Suzhou Douson Drilling and Super Dragon Engineering Plastics 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.