Correlation Between Luzhou Lao and Zhuzhou Kibing

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

Diversification Opportunities for Luzhou Lao and Zhuzhou Kibing

0.65

Correlation Coefficient

Luzhou Lao  Zhuzhou Kibing

Poor diversification

The 3 months correlation between Luzhou and Zhuzhou is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Luzhou Lao Jiao and Zhuzhou Kibing Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhuzhou Kibing Group 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 Zhuzhou Kibing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhuzhou Kibing Group has no effect on the direction of Luzhou Lao i.e., Luzhou Lao and Zhuzhou Kibing go up and down completely randomly.

Pair Corralation between Luzhou Lao and Zhuzhou Kibing

Assuming the 90 days trading horizon Luzhou Lao Jiao is expected to under-perform the Zhuzhou Kibing. In addition to that, Luzhou Lao is 1.18 times more volatile than Zhuzhou Kibing Group. It trades about -0.73 of its total potential returns per unit of risk. Zhuzhou Kibing Group is currently generating about -0.69 per unit of volatility. If you would invest  646.00  in Zhuzhou Kibing Group on October 13, 2024 and sell it today you would lose (116.00) from holding Zhuzhou Kibing Group or give up 17.96% of portfolio value over 90 days.

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

Luzhou Lao Jiao  vs.  Zhuzhou Kibing Group

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.

Zhuzhou Kibing Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhuzhou Kibing Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Luzhou Lao and Zhuzhou Kibing

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

The idea behind Luzhou Lao Jiao and Zhuzhou Kibing Group 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.