Correlation Between Suzhou Xingye and Nanya New

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

Diversification Opportunities for Suzhou Xingye and Nanya New

0.4

Correlation Coefficient

Suzhou Xingye  Nanya New

Very weak diversification

The 3 months correlation between Suzhou and Nanya is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Suzhou Xingye Material and Nanya New Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanya New Material 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 Nanya New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanya New Material has no effect on the direction of Suzhou Xingye i.e., Suzhou Xingye and Nanya New go up and down completely randomly.

Pair Corralation between Suzhou Xingye and Nanya New

Assuming the 90 days trading horizon Suzhou Xingye is expected to generate 1.28 times less return on investment than Nanya New. But when comparing it to its historical volatility, Suzhou Xingye Material is 1.14 times less risky than Nanya New. It trades about 0.11 of its potential returns per unit of risk. Nanya New Material is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,845  in Nanya New Material on December 5, 2024 and sell it today you would earn a total of  1,169  from holding Nanya New Material or generate 63.36% return on investment over 90 days.

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

Suzhou Xingye Material  vs.  Nanya New Material

Suzhou Xingye Material

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Xingye Material are ranked lower than 4 (%) 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.

Nanya New Material

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nanya New Material are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanya New sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Suzhou Xingye and Nanya New

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

The idea behind Suzhou Xingye Material and Nanya New Material 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.