Correlation Between Suzhou Douson and Tsinghuatongfang

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

Diversification Opportunities for Suzhou Douson and Tsinghuatongfang

0.53

Correlation Coefficient

Suzhou Douson  Tsinghuatongfang

Very weak diversification

The 3 months correlation between Suzhou and Tsinghuatongfang is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Suzhou Douson Drilling and Tsinghuatongfang Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsinghuatongfang 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 Tsinghuatongfang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsinghuatongfang has no effect on the direction of Suzhou Douson i.e., Suzhou Douson and Tsinghuatongfang go up and down completely randomly.

Pair Corralation between Suzhou Douson and Tsinghuatongfang

Assuming the 90 days trading horizon Suzhou Douson Drilling is expected to generate 1.09 times more return on investment than Tsinghuatongfang. However, Suzhou Douson is 1.09 times more volatile than Tsinghuatongfang Co. It trades about 0.16 of its potential returns per unit of risk. Tsinghuatongfang Co is currently generating about 0.01 per unit of risk. If you would invest  1,838  in Suzhou Douson Drilling on October 13, 2024 and sell it today you would earn a total of  718.00  from holding Suzhou Douson Drilling or generate 39.06% return on investment over 90 days.

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

Suzhou Douson Drilling  vs.  Tsinghuatongfang Co

Suzhou Douson Drilling

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Douson Drilling are ranked lower than 12 (%) 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.

Tsinghuatongfang

Risk-Adjusted Performance

0 of 100

Weak

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

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

The idea behind Suzhou Douson Drilling and Tsinghuatongfang 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.

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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.