Correlation Between Blue Sail and SuZhou ChunXing

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

By analyzing existing cross correlation between Blue Sail Medical and SuZhou ChunXing Precision, you can compare the effects of market volatilities on Blue Sail and SuZhou ChunXing 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 Blue Sail with a short position of SuZhou ChunXing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Sail and SuZhou ChunXing.

Diversification Opportunities for Blue Sail and SuZhou ChunXing

0.82

Correlation Coefficient

Blue Sail  SuZhou ChunXing

Very poor diversification

The 3 months correlation between Blue and SuZhou is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Blue Sail Medical and SuZhou ChunXing Precision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SuZhou ChunXing Precision and Blue Sail 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 Blue Sail Medical are associated (or correlated) with SuZhou ChunXing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SuZhou ChunXing Precision has no effect on the direction of Blue Sail i.e., Blue Sail and SuZhou ChunXing go up and down completely randomly.

Pair Corralation between Blue Sail and SuZhou ChunXing

Assuming the 90 days trading horizon Blue Sail is expected to generate 3.44 times less return on investment than SuZhou ChunXing. But when comparing it to its historical volatility, Blue Sail Medical is 2.21 times less risky than SuZhou ChunXing. It trades about 0.1 of its potential returns per unit of risk. SuZhou ChunXing Precision is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  312.00  in SuZhou ChunXing Precision on September 25, 2024 and sell it today you would earn a total of  177.00  from holding SuZhou ChunXing Precision or generate 56.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

Blue Sail Medical  vs.  SuZhou ChunXing Precision

Blue Sail Medical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Sail Medical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Blue Sail sustained solid returns over the last few months and may actually be approaching a breakup point.

SuZhou ChunXing Precision

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SuZhou ChunXing Precision are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SuZhou ChunXing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Blue Sail and SuZhou ChunXing

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

The idea behind Blue Sail Medical and SuZhou ChunXing Precision 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.