Correlation Between Superior Plus and China Overseas

Can any of the company-specific risk be diversified away by investing in both Superior Plus and China Overseas 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 Superior Plus and China Overseas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Superior Plus Corp and China Overseas Land, you can compare the effects of market volatilities on Superior Plus and China Overseas 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 Superior Plus with a short position of China Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Superior Plus and China Overseas.

Diversification Opportunities for Superior Plus and China Overseas

0.36

Correlation Coefficient

Superior Plus  China Overseas

Weak diversification

The 3 months correlation between Superior and China is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and China Overseas Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Overseas Land and Superior Plus 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 Superior Plus Corp are associated (or correlated) with China Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Overseas Land has no effect on the direction of Superior Plus i.e., Superior Plus and China Overseas go up and down completely randomly.

Pair Corralation between Superior Plus and China Overseas

Assuming the 90 days horizon Superior Plus is expected to generate 16.11 times less return on investment than China Overseas. But when comparing it to its historical volatility, Superior Plus Corp is 1.18 times less risky than China Overseas. It trades about 0.01 of its potential returns per unit of risk. China Overseas Land is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  149.00  in China Overseas Land on December 22, 2024 and sell it today you would earn a total of  22.00  from holding China Overseas Land or generate 14.77% return on investment over 90 days.

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

Superior Plus Corp  vs.  China Overseas Land

Superior Plus Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Superior Plus is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

China Overseas Land

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Overseas Land are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Overseas reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Superior Plus and China Overseas

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

The idea behind Superior Plus Corp and China Overseas Land 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.