Correlation Between China Longyuan and Dalian Zeus

Can any of the company-specific risk be diversified away by investing in both China Longyuan and Dalian Zeus 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 China Longyuan and Dalian Zeus into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Longyuan Power and Dalian Zeus Entertainment, you can compare the effects of market volatilities on China Longyuan and Dalian Zeus 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 China Longyuan with a short position of Dalian Zeus. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Longyuan and Dalian Zeus.

Diversification Opportunities for China Longyuan and Dalian Zeus

0.24

Correlation Coefficient

China Longyuan  Dalian Zeus

Modest diversification

The 3 months correlation between China and Dalian is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding China Longyuan Power and Dalian Zeus Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dalian Zeus Entertainment and China Longyuan 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 China Longyuan Power are associated (or correlated) with Dalian Zeus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dalian Zeus Entertainment has no effect on the direction of China Longyuan i.e., China Longyuan and Dalian Zeus go up and down completely randomly.

Pair Corralation between China Longyuan and Dalian Zeus

Assuming the 90 days trading horizon China Longyuan Power is expected to under-perform the Dalian Zeus. But the stock apears to be less risky and, when comparing its historical volatility, China Longyuan Power is 2.26 times less risky than Dalian Zeus. The stock trades about 0.0 of its potential returns per unit of risk. The Dalian Zeus Entertainment is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  582.00  in Dalian Zeus Entertainment on December 2, 2024 and sell it today you would earn a total of  127.00  from holding Dalian Zeus Entertainment or generate 21.82% return on investment over 90 days.

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

China Longyuan Power  vs.  Dalian Zeus Entertainment

China Longyuan Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Longyuan Power 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.

Dalian Zeus Entertainment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dalian Zeus Entertainment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dalian Zeus sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Longyuan and Dalian Zeus

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

The idea behind China Longyuan Power and Dalian Zeus Entertainment 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.