Correlation Between Suzano SA and Nine Dragons

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

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

Diversification Opportunities for Suzano SA and Nine Dragons

0.01

Correlation Coefficient

Suzano SA  Nine Dragons

Significant diversification

The 3 months correlation between Suzano and Nine is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Suzano SA 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 Suzano SA 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 Suzano SA 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 Suzano SA i.e., Suzano SA and Nine Dragons go up and down completely randomly.

Pair Corralation between Suzano SA and Nine Dragons

Assuming the 90 days trading horizon Suzano SA is expected to under-perform the Nine Dragons. But the stock apears to be less risky and, when comparing its historical volatility, Suzano SA is 1.84 times less risky than Nine Dragons. The stock trades about -0.31 of its potential returns per unit of risk. The Nine Dragons Paper is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  37.00  in Nine Dragons Paper on December 5, 2024 and sell it today you would earn a total of  3.00  from holding Nine Dragons Paper or generate 8.11% return on investment over 90 days.

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

Suzano SA  vs.  Nine Dragons Paper

Suzano SA

Risk-Adjusted Performance

Weak

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

Nine Dragons Paper

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nine Dragons Paper are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Nine Dragons is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Suzano SA and Nine Dragons

The main advantage of trading using opposite Suzano SA and Nine Dragons positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Suzano SA 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 Suzano SA 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..