Correlation Between Rongan Property and Henan Lantian

Can any of the company-specific risk be diversified away by investing in both Rongan Property and Henan Lantian 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 Rongan Property and Henan Lantian into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rongan Property Co and Henan Lantian Gas, you can compare the effects of market volatilities on Rongan Property and Henan Lantian 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 Rongan Property with a short position of Henan Lantian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rongan Property and Henan Lantian.

Diversification Opportunities for Rongan Property and Henan Lantian

0.02

Correlation Coefficient

Rongan Property  Henan Lantian

Significant diversification

The 3 months correlation between Rongan and Henan is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Rongan Property Co and Henan Lantian Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henan Lantian Gas and Rongan Property 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 Rongan Property Co are associated (or correlated) with Henan Lantian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henan Lantian Gas has no effect on the direction of Rongan Property i.e., Rongan Property and Henan Lantian go up and down completely randomly.

Pair Corralation between Rongan Property and Henan Lantian

Assuming the 90 days trading horizon Rongan Property is expected to generate 29.15 times less return on investment than Henan Lantian. In addition to that, Rongan Property is 1.56 times more volatile than Henan Lantian Gas. It trades about 0.0 of its total potential returns per unit of risk. Henan Lantian Gas is currently generating about 0.05 per unit of volatility. If you would invest  921.00  in Henan Lantian Gas on October 8, 2024 and sell it today you would earn a total of  230.00  from holding Henan Lantian Gas or generate 24.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.64%
Values	Daily Returns

Rongan Property Co  vs.  Henan Lantian Gas

Rongan Property

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rongan Property Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Henan Lantian Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Henan Lantian Gas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Rongan Property and Henan Lantian

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

The idea behind Rongan Property Co and Henan Lantian Gas 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.