Correlation Between Suzhou Novoprotein and Sichuan Changhong

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

By analyzing existing cross correlation between Suzhou Novoprotein Scientific and Sichuan Changhong Electric, you can compare the effects of market volatilities on Suzhou Novoprotein and Sichuan Changhong 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 Novoprotein with a short position of Sichuan Changhong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suzhou Novoprotein and Sichuan Changhong.

Diversification Opportunities for Suzhou Novoprotein and Sichuan Changhong

0.38

Correlation Coefficient

Suzhou Novoprotein  Sichuan Changhong

Weak diversification

The 3 months correlation between Suzhou and Sichuan is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Suzhou Novoprotein Scientific and Sichuan Changhong Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Changhong and Suzhou Novoprotein 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 Novoprotein Scientific are associated (or correlated) with Sichuan Changhong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Changhong has no effect on the direction of Suzhou Novoprotein i.e., Suzhou Novoprotein and Sichuan Changhong go up and down completely randomly.

Pair Corralation between Suzhou Novoprotein and Sichuan Changhong

Assuming the 90 days trading horizon Suzhou Novoprotein Scientific is expected to under-perform the Sichuan Changhong. But the stock apears to be less risky and, when comparing its historical volatility, Suzhou Novoprotein Scientific is 2.31 times less risky than Sichuan Changhong. The stock trades about -0.1 of its potential returns per unit of risk. The Sichuan Changhong Electric is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  650.00  in Sichuan Changhong Electric on October 3, 2024 and sell it today you would earn a total of  315.00  from holding Sichuan Changhong Electric or generate 48.46% return on investment over 90 days.

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

Suzhou Novoprotein Scientific  vs.  Sichuan Changhong Electric

Suzhou Novoprotein

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suzhou Novoprotein Scientific has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Sichuan Changhong

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Changhong Electric are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Changhong sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Suzhou Novoprotein and Sichuan Changhong

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

The idea behind Suzhou Novoprotein Scientific and Sichuan Changhong Electric 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.