Correlation Between Suzhou Xingye and Shanghai Shuixing

Can any of the company-specific risk be diversified away by investing in both Suzhou Xingye and Shanghai Shuixing 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 Xingye and Shanghai Shuixing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Suzhou Xingye Material and Shanghai Shuixing Home, you can compare the effects of market volatilities on Suzhou Xingye and Shanghai Shuixing 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 Xingye with a short position of Shanghai Shuixing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suzhou Xingye and Shanghai Shuixing.

Diversification Opportunities for Suzhou Xingye and Shanghai Shuixing

-0.72

Correlation Coefficient

Suzhou Xingye  Shanghai Shuixing

Pay attention - limited upside

The 3 months correlation between Suzhou and Shanghai is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Suzhou Xingye Material and Shanghai Shuixing Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Shuixing Home and Suzhou Xingye 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 Xingye Material are associated (or correlated) with Shanghai Shuixing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Shuixing Home has no effect on the direction of Suzhou Xingye i.e., Suzhou Xingye and Shanghai Shuixing go up and down completely randomly.

Pair Corralation between Suzhou Xingye and Shanghai Shuixing

Assuming the 90 days trading horizon Suzhou Xingye Material is expected to generate 2.0 times more return on investment than Shanghai Shuixing. However, Suzhou Xingye is 2.0 times more volatile than Shanghai Shuixing Home. It trades about 0.12 of its potential returns per unit of risk. Shanghai Shuixing Home is currently generating about -0.03 per unit of risk. If you would invest  850.00  in Suzhou Xingye Material on December 26, 2024 and sell it today you would earn a total of  221.00  from holding Suzhou Xingye Material or generate 26.0% return on investment over 90 days.

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

Suzhou Xingye Material  vs.  Shanghai Shuixing Home

Suzhou Xingye Material

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Xingye Material are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Suzhou Xingye sustained solid returns over the last few months and may actually be approaching a breakup point.

Shanghai Shuixing Home

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanghai Shuixing Home has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shanghai Shuixing 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 Xingye and Shanghai Shuixing

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

The idea behind Suzhou Xingye Material and Shanghai Shuixing Home 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .