Correlation Between Super Dragon and Associated Industries

Can any of the company-specific risk be diversified away by investing in both Super Dragon and Associated Industries 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 Super Dragon and Associated Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Super Dragon Technology and Associated Industries China, you can compare the effects of market volatilities on Super Dragon and Associated Industries 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 Super Dragon with a short position of Associated Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Super Dragon and Associated Industries.

Diversification Opportunities for Super Dragon and Associated Industries

0.8

Correlation Coefficient

Super Dragon  Associated Industries

Very poor diversification

The 3 months correlation between Super and Associated is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Super Dragon Technology and Associated Industries China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated Industries and Super Dragon 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 Super Dragon Technology are associated (or correlated) with Associated Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated Industries has no effect on the direction of Super Dragon i.e., Super Dragon and Associated Industries go up and down completely randomly.

Pair Corralation between Super Dragon and Associated Industries

Assuming the 90 days trading horizon Super Dragon Technology is expected to generate 2.37 times more return on investment than Associated Industries. However, Super Dragon is 2.37 times more volatile than Associated Industries China. It trades about 0.0 of its potential returns per unit of risk. Associated Industries China is currently generating about -0.17 per unit of risk. If you would invest  2,815  in Super Dragon Technology on October 22, 2024 and sell it today you would lose (5.00) from holding Super Dragon Technology or give up 0.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Super Dragon Technology  vs.  Associated Industries China

Super Dragon Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Super Dragon Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Associated Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Associated Industries China has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Super Dragon and Associated Industries

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

The idea behind Super Dragon Technology and Associated Industries China 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.