Correlation Between Luzhou Lao and Xinjiang Goldwind

Can any of the company-specific risk be diversified away by investing in both Luzhou Lao and Xinjiang Goldwind 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 Luzhou Lao and Xinjiang Goldwind into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Luzhou Lao Jiao and Xinjiang Goldwind Science, you can compare the effects of market volatilities on Luzhou Lao and Xinjiang Goldwind 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 Luzhou Lao with a short position of Xinjiang Goldwind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Luzhou Lao and Xinjiang Goldwind.

Diversification Opportunities for Luzhou Lao and Xinjiang Goldwind

0.88

Correlation Coefficient

Luzhou Lao  Xinjiang Goldwind

Very poor diversification

The 3 months correlation between Luzhou and Xinjiang is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Luzhou Lao Jiao and Xinjiang Goldwind Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinjiang Goldwind Science and Luzhou Lao 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 Luzhou Lao Jiao are associated (or correlated) with Xinjiang Goldwind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinjiang Goldwind Science has no effect on the direction of Luzhou Lao i.e., Luzhou Lao and Xinjiang Goldwind go up and down completely randomly.

Pair Corralation between Luzhou Lao and Xinjiang Goldwind

Assuming the 90 days trading horizon Luzhou Lao Jiao is expected to under-perform the Xinjiang Goldwind. In addition to that, Luzhou Lao is 1.16 times more volatile than Xinjiang Goldwind Science. It trades about -0.01 of its total potential returns per unit of risk. Xinjiang Goldwind Science is currently generating about 0.15 per unit of volatility. If you would invest  687.00  in Xinjiang Goldwind Science on September 19, 2024 and sell it today you would earn a total of  379.00  from holding Xinjiang Goldwind Science or generate 55.17% return on investment over 90 days.

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

Luzhou Lao Jiao  vs.  Xinjiang Goldwind Science

Luzhou Lao Jiao

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Luzhou Lao Jiao are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Luzhou Lao sustained solid returns over the last few months and may actually be approaching a breakup point.

Xinjiang Goldwind Science

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Luzhou Lao and Xinjiang Goldwind

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

The idea behind Luzhou Lao Jiao and Xinjiang Goldwind Science 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.