Correlation Between Sublime China and DO Home

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Can any of the company-specific risk be diversified away by investing in both Sublime China and DO Home 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 Sublime China and DO Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sublime China Information and DO Home Collection, you can compare the effects of market volatilities on Sublime China and DO Home 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 Sublime China with a short position of DO Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sublime China and DO Home.

Diversification Opportunities for Sublime China and DO Home

-0.19
  Correlation Coefficient

Good diversification

The 3 months correlation between Sublime and 002798 is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Sublime China Information and DO Home Collection in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DO Home Collection and Sublime China 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 Sublime China Information are associated (or correlated) with DO Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DO Home Collection has no effect on the direction of Sublime China i.e., Sublime China and DO Home go up and down completely randomly.

Pair Corralation between Sublime China and DO Home

Assuming the 90 days trading horizon Sublime China Information is expected to generate 1.47 times more return on investment than DO Home. However, Sublime China is 1.47 times more volatile than DO Home Collection. It trades about 0.26 of its potential returns per unit of risk. DO Home Collection is currently generating about -0.16 per unit of risk. If you would invest  6,073  in Sublime China Information on November 3, 2024 and sell it today you would earn a total of  1,935  from holding Sublime China Information or generate 31.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Sublime China Information  vs.  DO Home Collection

 Performance 
       Timeline  
Sublime China Information 

Risk-Adjusted Performance

12 of 100

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

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days DO Home Collection has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, DO Home is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sublime China and DO Home Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sublime China and DO Home

The main advantage of trading using opposite Sublime China and DO Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sublime China position performs unexpectedly, DO Home 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 DO Home will offset losses from the drop in DO Home's long position.
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The idea behind Sublime China Information and DO Home Collection 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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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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