Correlation Between Luzhou Lao and Jahen Household

Can any of the company-specific risk be diversified away by investing in both Luzhou Lao and Jahen Household 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 Jahen Household 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 Jahen Household Products, you can compare the effects of market volatilities on Luzhou Lao and Jahen Household 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 Jahen Household. Check out your portfolio center. Please also check ongoing floating volatility patterns of Luzhou Lao and Jahen Household.

Diversification Opportunities for Luzhou Lao and Jahen Household

0.16

Correlation Coefficient

Luzhou Lao  Jahen Household

Average diversification

The 3 months correlation between Luzhou and Jahen is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Luzhou Lao Jiao and Jahen Household Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jahen Household Products 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 Jahen Household. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jahen Household Products has no effect on the direction of Luzhou Lao i.e., Luzhou Lao and Jahen Household go up and down completely randomly.

Pair Corralation between Luzhou Lao and Jahen Household

Assuming the 90 days trading horizon Luzhou Lao Jiao is expected to under-perform the Jahen Household. But the stock apears to be less risky and, when comparing its historical volatility, Luzhou Lao Jiao is 3.46 times less risky than Jahen Household. The stock trades about -0.38 of its potential returns per unit of risk. The Jahen Household Products is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,620  in Jahen Household Products on October 8, 2024 and sell it today you would lose (189.00) from holding Jahen Household Products or give up 11.67% of portfolio value over 90 days.

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

Luzhou Lao Jiao  vs.  Jahen Household Products

Luzhou Lao Jiao

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Luzhou Lao Jiao 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.

Jahen Household Products

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Luzhou Lao and Jahen Household

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

The idea behind Luzhou Lao Jiao and Jahen Household Products 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.