Correlation Between Suzhou Oriental and Guangdong Xiongsu

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

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

Diversification Opportunities for Suzhou Oriental and Guangdong Xiongsu

0.43

Correlation Coefficient

Suzhou Oriental  Guangdong Xiongsu

Very weak diversification

The 3 months correlation between Suzhou and Guangdong is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Suzhou Oriental Semiconductor and Guangdong Xiongsu Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Xiongsu and Suzhou Oriental 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 Oriental Semiconductor are associated (or correlated) with Guangdong Xiongsu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Xiongsu has no effect on the direction of Suzhou Oriental i.e., Suzhou Oriental and Guangdong Xiongsu go up and down completely randomly.

Pair Corralation between Suzhou Oriental and Guangdong Xiongsu

Assuming the 90 days trading horizon Suzhou Oriental Semiconductor is expected to under-perform the Guangdong Xiongsu. But the stock apears to be less risky and, when comparing its historical volatility, Suzhou Oriental Semiconductor is 1.37 times less risky than Guangdong Xiongsu. The stock trades about -0.05 of its potential returns per unit of risk. The Guangdong Xiongsu Technology is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  595.00  in Guangdong Xiongsu Technology on October 11, 2024 and sell it today you would earn a total of  90.00  from holding Guangdong Xiongsu Technology or generate 15.13% return on investment over 90 days.

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

Suzhou Oriental Semiconductor  vs.  Guangdong Xiongsu Technology

Suzhou Oriental Semi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suzhou Oriental Semiconductor 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.

Guangdong Xiongsu

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Xiongsu Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Xiongsu sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Suzhou Oriental and Guangdong Xiongsu

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

The idea behind Suzhou Oriental Semiconductor and Guangdong Xiongsu 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.