Correlation Between China Longyuan and ButOne Information

Can any of the company-specific risk be diversified away by investing in both China Longyuan and ButOne Information 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 ButOne Information 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 ButOne Information Corp, you can compare the effects of market volatilities on China Longyuan and ButOne Information 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 ButOne Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Longyuan and ButOne Information.

Diversification Opportunities for China Longyuan and ButOne Information

0.6

Correlation Coefficient

China Longyuan  ButOne Information

Poor diversification

The 3 months correlation between China and ButOne is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding China Longyuan Power and ButOne Information Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ButOne Information Corp 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 ButOne Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ButOne Information Corp has no effect on the direction of China Longyuan i.e., China Longyuan and ButOne Information go up and down completely randomly.

Pair Corralation between China Longyuan and ButOne Information

Assuming the 90 days trading horizon China Longyuan Power is expected to under-perform the ButOne Information. But the stock apears to be less risky and, when comparing its historical volatility, China Longyuan Power is 1.8 times less risky than ButOne Information. The stock trades about -0.03 of its potential returns per unit of risk. The ButOne Information Corp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,332  in ButOne Information Corp on October 5, 2024 and sell it today you would lose (414.00) from holding ButOne Information Corp or give up 17.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.67%
Values	Daily Returns

China Longyuan Power  vs.  ButOne Information Corp

China Longyuan Power

Risk-Adjusted Performance

0 of 100

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.

ButOne Information Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ButOne Information Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ButOne Information is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Longyuan and ButOne Information

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

The idea behind China Longyuan Power and ButOne Information Corp 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.