Correlation Between CareRay Digital and Suzhou Douson

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

By analyzing existing cross correlation between CareRay Digital Medical and Suzhou Douson Drilling, you can compare the effects of market volatilities on CareRay Digital and Suzhou Douson 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 CareRay Digital with a short position of Suzhou Douson. Check out your portfolio center. Please also check ongoing floating volatility patterns of CareRay Digital and Suzhou Douson.

Diversification Opportunities for CareRay Digital and Suzhou Douson

0.73

Correlation Coefficient

CareRay Digital  Suzhou Douson

Poor diversification

The 3 months correlation between CareRay and Suzhou is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding CareRay Digital Medical and Suzhou Douson Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou Douson Drilling and CareRay Digital 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 CareRay Digital Medical are associated (or correlated) with Suzhou Douson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou Douson Drilling has no effect on the direction of CareRay Digital i.e., CareRay Digital and Suzhou Douson go up and down completely randomly.

Pair Corralation between CareRay Digital and Suzhou Douson

Assuming the 90 days trading horizon CareRay Digital Medical is expected to under-perform the Suzhou Douson. In addition to that, CareRay Digital is 1.07 times more volatile than Suzhou Douson Drilling. It trades about -0.02 of its total potential returns per unit of risk. Suzhou Douson Drilling is currently generating about -0.02 per unit of volatility. If you would invest  3,176  in Suzhou Douson Drilling on October 6, 2024 and sell it today you would lose (831.00) from holding Suzhou Douson Drilling or give up 26.16% of portfolio value over 90 days.

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

CareRay Digital Medical  vs.  Suzhou Douson Drilling

CareRay Digital Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CareRay Digital Medical 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.

Suzhou Douson Drilling

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Douson Drilling are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Suzhou Douson sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CareRay Digital and Suzhou Douson

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

The idea behind CareRay Digital Medical and Suzhou Douson Drilling 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.