Correlation Between Super Dragon and Shui Mu
Can any of the company-specific risk be diversified away by investing in both Super Dragon and Shui Mu 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 Super Dragon and Shui Mu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Super Dragon Technology and Shui Mu International Co, you can compare the effects of market volatilities on Super Dragon and Shui Mu 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 Super Dragon with a short position of Shui Mu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Super Dragon and Shui Mu.
Diversification Opportunities for Super Dragon and Shui Mu
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Super and Shui is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Super Dragon Technology and Shui Mu International Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shui Mu International and Super Dragon 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 Super Dragon Technology are associated (or correlated) with Shui Mu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shui Mu International has no effect on the direction of Super Dragon i.e., Super Dragon and Shui Mu go up and down completely randomly.
Pair Corralation between Super Dragon and Shui Mu
Assuming the 90 days trading horizon Super Dragon Technology is expected to under-perform the Shui Mu. In addition to that, Super Dragon is 4.21 times more volatile than Shui Mu International Co. It trades about -0.21 of its total potential returns per unit of risk. Shui Mu International Co is currently generating about -0.12 per unit of volatility. If you would invest 1,185 in Shui Mu International Co on September 12, 2024 and sell it today you would lose (15.00) from holding Shui Mu International Co or give up 1.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Super Dragon Technology vs. Shui Mu International Co
Performance |
| Timeline |
| Super Dragon Technology |
| Shui Mu International |
Super Dragon and Shui Mu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Super Dragon and Shui Mu
The main advantage of trading using opposite Super Dragon and Shui Mu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Super Dragon position performs unexpectedly, Shui Mu 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 Shui Mu will offset losses from the drop in Shui Mu's long position.| Super Dragon vs. Tainan Spinning Co | Super Dragon vs. Lealea Enterprise Co | Super Dragon vs. China Petrochemical Development | Super Dragon vs. Ruentex Development Co |
| Shui Mu vs. Jinli Group Holdings | Shui Mu vs. New Palace International | Shui Mu vs. Les Enphants Co | Shui Mu vs. Shin Shin Co |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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