Correlation Between Suzhou Novoprotein and Shanghai Shuixing

Can any of the company-specific risk be diversified away by investing in both Suzhou Novoprotein 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 Novoprotein 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 Novoprotein Scientific and Shanghai Shuixing Home, you can compare the effects of market volatilities on Suzhou Novoprotein 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 Novoprotein with a short position of Shanghai Shuixing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suzhou Novoprotein and Shanghai Shuixing.

Diversification Opportunities for Suzhou Novoprotein and Shanghai Shuixing

0.18

Correlation Coefficient

Suzhou Novoprotein  Shanghai Shuixing

Average diversification

The 3 months correlation between Suzhou and Shanghai is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Suzhou Novoprotein Scientific 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 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 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 Novoprotein i.e., Suzhou Novoprotein and Shanghai Shuixing go up and down completely randomly.

Pair Corralation between Suzhou Novoprotein and Shanghai Shuixing

Assuming the 90 days trading horizon Suzhou Novoprotein Scientific is expected to under-perform the Shanghai Shuixing. But the stock apears to be less risky and, when comparing its historical volatility, Suzhou Novoprotein Scientific is 1.82 times less risky than Shanghai Shuixing. The stock trades about -0.09 of its potential returns per unit of risk. The Shanghai Shuixing Home is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,608  in Shanghai Shuixing Home on December 2, 2024 and sell it today you would lose (62.00) from holding Shanghai Shuixing Home or give up 3.86% of portfolio value over 90 days.

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

Suzhou Novoprotein Scientific  vs.  Shanghai Shuixing Home

Suzhou Novoprotein

Risk-Adjusted Performance

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 Novoprotein and Shanghai Shuixing

The main advantage of trading using opposite Suzhou Novoprotein and Shanghai Shuixing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Suzhou Novoprotein 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 Novoprotein Scientific 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.

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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.