Correlation Between China Building and Super Dragon
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By analyzing existing cross correlation between China Building Material and Super Dragon Engineering Plastics, you can compare the effects of market volatilities on China Building and Super Dragon 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 China Building with a short position of Super Dragon. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Building and Super Dragon.
Diversification Opportunities for China Building and Super Dragon
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between China and Super is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding China Building Material and Super Dragon Engineering Plast in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Super Dragon Enginee and China Building 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 China Building Material are associated (or correlated) with Super Dragon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Super Dragon Enginee has no effect on the direction of China Building i.e., China Building and Super Dragon go up and down completely randomly.
Pair Corralation between China Building and Super Dragon
Assuming the 90 days trading horizon China Building is expected to generate 1.74 times less return on investment than Super Dragon. But when comparing it to its historical volatility, China Building Material is 3.03 times less risky than Super Dragon. It trades about 0.71 of its potential returns per unit of risk. Super Dragon Engineering Plastics is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 3,215 in Super Dragon Engineering Plastics on November 9, 2024 and sell it today you would earn a total of 391.00 from holding Super Dragon Engineering Plastics or generate 12.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 12.5% |
| Values | Daily Returns |
China Building Material vs. Super Dragon Engineering Plast
Performance |
| Timeline |
| China Building Material |
Risk-Adjusted Performance
Excellent
Weak | Strong |
| Super Dragon Enginee |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
China Building and Super Dragon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Building and Super Dragon
The main advantage of trading using opposite China Building and Super Dragon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Building position performs unexpectedly, Super Dragon 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 Super Dragon will offset losses from the drop in Super Dragon's long position.The idea behind China Building Material and Super Dragon Engineering Plastics 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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