Correlation Between Sappi and Nine Dragons

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

By analyzing existing cross correlation between Sappi Ltd ADR and Nine Dragons Paper, you can compare the effects of market volatilities on Sappi and Nine Dragons 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 Sappi with a short position of Nine Dragons. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sappi and Nine Dragons.

Diversification Opportunities for Sappi and Nine Dragons

0.3

Correlation Coefficient

Sappi  Nine Dragons

Weak diversification

The 3 months correlation between Sappi and Nine is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sappi Ltd ADR and Nine Dragons Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nine Dragons Paper and Sappi 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 Sappi Ltd ADR are associated (or correlated) with Nine Dragons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nine Dragons Paper has no effect on the direction of Sappi i.e., Sappi and Nine Dragons go up and down completely randomly.

Pair Corralation between Sappi and Nine Dragons

If you would invest  823.00  in Nine Dragons Paper on October 12, 2024 and sell it today you would lose (23.00) from holding Nine Dragons Paper or give up 2.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	0.53%
Values	Daily Returns

Sappi Ltd ADR  vs.  Nine Dragons Paper

Sappi Ltd ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sappi Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking indicators, Sappi is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nine Dragons Paper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nine Dragons Paper has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sappi and Nine Dragons

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

The idea behind Sappi Ltd ADR and Nine Dragons Paper 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.