Correlation Between Suzhou Weizhixiang and Northking Information

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

By analyzing existing cross correlation between Suzhou Weizhixiang Food and Northking Information Technology, you can compare the effects of market volatilities on Suzhou Weizhixiang and Northking Information 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 Weizhixiang with a short position of Northking Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suzhou Weizhixiang and Northking Information.

Diversification Opportunities for Suzhou Weizhixiang and Northking Information

0.8

Correlation Coefficient

Suzhou Weizhixiang  Northking Information

Very poor diversification

The 3 months correlation between Suzhou and Northking is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Suzhou Weizhixiang Food and Northking Information Technolo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northking Information and Suzhou Weizhixiang 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 Weizhixiang Food are associated (or correlated) with Northking Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northking Information has no effect on the direction of Suzhou Weizhixiang i.e., Suzhou Weizhixiang and Northking Information go up and down completely randomly.

Pair Corralation between Suzhou Weizhixiang and Northking Information

Assuming the 90 days trading horizon Suzhou Weizhixiang Food is expected to generate 0.85 times more return on investment than Northking Information. However, Suzhou Weizhixiang Food is 1.17 times less risky than Northking Information. It trades about 0.22 of its potential returns per unit of risk. Northking Information Technology is currently generating about 0.17 per unit of risk. If you would invest  1,789  in Suzhou Weizhixiang Food on September 3, 2024 and sell it today you would earn a total of  961.00  from holding Suzhou Weizhixiang Food or generate 53.72% return on investment over 90 days.

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

Suzhou Weizhixiang Food  vs.  Northking Information Technolo

Suzhou Weizhixiang Food

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Weizhixiang Food are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Suzhou Weizhixiang sustained solid returns over the last few months and may actually be approaching a breakup point.

Northking Information

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Northking Information Technology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Northking Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Suzhou Weizhixiang and Northking Information

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

The idea behind Suzhou Weizhixiang Food and Northking Information Technology 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.