Correlation Between Suzhou Weizhixiang and Fushun Special

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

By analyzing existing cross correlation between Suzhou Weizhixiang Food and Fushun Special Steel, you can compare the effects of market volatilities on Suzhou Weizhixiang and Fushun Special 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 Suzhou Weizhixiang with a short position of Fushun Special. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suzhou Weizhixiang and Fushun Special.

Diversification Opportunities for Suzhou Weizhixiang and Fushun Special

0.5

Correlation Coefficient

Suzhou Weizhixiang  Fushun Special

Very weak diversification

The 3 months correlation between Suzhou and Fushun is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Suzhou Weizhixiang Food and Fushun Special Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fushun Special Steel and Suzhou Weizhixiang 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 Suzhou Weizhixiang Food are associated (or correlated) with Fushun Special. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fushun Special Steel has no effect on the direction of Suzhou Weizhixiang i.e., Suzhou Weizhixiang and Fushun Special go up and down completely randomly.

Pair Corralation between Suzhou Weizhixiang and Fushun Special

Assuming the 90 days trading horizon Suzhou Weizhixiang Food is expected to generate 1.08 times more return on investment than Fushun Special. However, Suzhou Weizhixiang is 1.08 times more volatile than Fushun Special Steel. It trades about 0.28 of its potential returns per unit of risk. Fushun Special Steel is currently generating about 0.15 per unit of risk. If you would invest  1,666  in Suzhou Weizhixiang Food on September 15, 2024 and sell it today you would earn a total of  1,412  from holding Suzhou Weizhixiang Food or generate 84.75% return on investment over 90 days.

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

Suzhou Weizhixiang Food  vs.  Fushun Special Steel

Suzhou Weizhixiang Food

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Weizhixiang Food are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Suzhou Weizhixiang sustained solid returns over the last few months and may actually be approaching a breakup point.

Fushun Special Steel

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fushun Special Steel are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fushun Special sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Suzhou Weizhixiang and Fushun Special

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

The idea behind Suzhou Weizhixiang Food and Fushun Special Steel 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.