Correlation Between Guangzhou KingTeller and Luolai Home

Can any of the company-specific risk be diversified away by investing in both Guangzhou KingTeller and Luolai Home 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 Guangzhou KingTeller and Luolai Home into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guangzhou KingTeller Technology and Luolai Home Textile, you can compare the effects of market volatilities on Guangzhou KingTeller and Luolai Home 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 Guangzhou KingTeller with a short position of Luolai Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou KingTeller and Luolai Home.

Diversification Opportunities for Guangzhou KingTeller and Luolai Home

0.67

Correlation Coefficient

Guangzhou KingTeller  Luolai Home

Poor diversification

The 3 months correlation between Guangzhou and Luolai is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou KingTeller Technolog and Luolai Home Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luolai Home Textile and Guangzhou KingTeller 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 Guangzhou KingTeller Technology are associated (or correlated) with Luolai Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luolai Home Textile has no effect on the direction of Guangzhou KingTeller i.e., Guangzhou KingTeller and Luolai Home go up and down completely randomly.

Pair Corralation between Guangzhou KingTeller and Luolai Home

Assuming the 90 days trading horizon Guangzhou KingTeller Technology is expected to generate 1.99 times more return on investment than Luolai Home. However, Guangzhou KingTeller is 1.99 times more volatile than Luolai Home Textile. It trades about 0.04 of its potential returns per unit of risk. Luolai Home Textile is currently generating about -0.01 per unit of risk. If you would invest  358.00  in Guangzhou KingTeller Technology on October 9, 2024 and sell it today you would earn a total of  43.00  from holding Guangzhou KingTeller Technology or generate 12.01% return on investment over 90 days.

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

Guangzhou KingTeller Technolog  vs.  Luolai Home Textile

Guangzhou KingTeller

Risk-Adjusted Performance

0 of 100

Very Weak

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

Luolai Home Textile

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Luolai Home Textile are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Luolai Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangzhou KingTeller and Luolai Home

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

The idea behind Guangzhou KingTeller Technology and Luolai Home Textile 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.