Correlation Between GRG Banking and Loongson Technology

Can any of the company-specific risk be diversified away by investing in both GRG Banking and Loongson Technology 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 GRG Banking and Loongson Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GRG Banking Equipment and Loongson Technology Corp, you can compare the effects of market volatilities on GRG Banking and Loongson Technology 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 GRG Banking with a short position of Loongson Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of GRG Banking and Loongson Technology.

Diversification Opportunities for GRG Banking and Loongson Technology

0.59

Correlation Coefficient

GRG Banking  Loongson Technology

Very weak diversification

The 3 months correlation between GRG and Loongson is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding GRG Banking Equipment and Loongson Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loongson Technology Corp and GRG Banking 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 GRG Banking Equipment are associated (or correlated) with Loongson Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loongson Technology Corp has no effect on the direction of GRG Banking i.e., GRG Banking and Loongson Technology go up and down completely randomly.

Pair Corralation between GRG Banking and Loongson Technology

Assuming the 90 days trading horizon GRG Banking Equipment is expected to generate 1.0 times more return on investment than Loongson Technology. However, GRG Banking is 1.0 times more volatile than Loongson Technology Corp. It trades about 0.08 of its potential returns per unit of risk. Loongson Technology Corp is currently generating about -0.07 per unit of risk. If you would invest  1,205  in GRG Banking Equipment on December 25, 2024 and sell it today you would earn a total of  140.00  from holding GRG Banking Equipment or generate 11.62% return on investment over 90 days.

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

GRG Banking Equipment  vs.  Loongson Technology Corp

GRG Banking Equipment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GRG Banking Equipment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GRG Banking sustained solid returns over the last few months and may actually be approaching a breakup point.

Loongson Technology Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Loongson Technology Corp 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with GRG Banking and Loongson Technology

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

The idea behind GRG Banking Equipment and Loongson Technology 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.