Correlation Between XinJiang GuoTong and Loctek Ergonomic

Can any of the company-specific risk be diversified away by investing in both XinJiang GuoTong and Loctek Ergonomic 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 XinJiang GuoTong and Loctek Ergonomic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between XinJiang GuoTong Pipeline and Loctek Ergonomic Technology, you can compare the effects of market volatilities on XinJiang GuoTong and Loctek Ergonomic 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 XinJiang GuoTong with a short position of Loctek Ergonomic. Check out your portfolio center. Please also check ongoing floating volatility patterns of XinJiang GuoTong and Loctek Ergonomic.

Diversification Opportunities for XinJiang GuoTong and Loctek Ergonomic

0.41

Correlation Coefficient

XinJiang GuoTong  Loctek Ergonomic

Very weak diversification

The 3 months correlation between XinJiang and Loctek is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding XinJiang GuoTong Pipeline and Loctek Ergonomic Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loctek Ergonomic Tec and XinJiang GuoTong 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 XinJiang GuoTong Pipeline are associated (or correlated) with Loctek Ergonomic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loctek Ergonomic Tec has no effect on the direction of XinJiang GuoTong i.e., XinJiang GuoTong and Loctek Ergonomic go up and down completely randomly.

Pair Corralation between XinJiang GuoTong and Loctek Ergonomic

Assuming the 90 days trading horizon XinJiang GuoTong Pipeline is expected to under-perform the Loctek Ergonomic. In addition to that, XinJiang GuoTong is 1.88 times more volatile than Loctek Ergonomic Technology. It trades about -0.27 of its total potential returns per unit of risk. Loctek Ergonomic Technology is currently generating about -0.14 per unit of volatility. If you would invest  1,640  in Loctek Ergonomic Technology on October 21, 2024 and sell it today you would lose (107.00) from holding Loctek Ergonomic Technology or give up 6.52% of portfolio value over 90 days.

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

XinJiang GuoTong Pipeline  vs.  Loctek Ergonomic Technology

XinJiang GuoTong Pipeline

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in XinJiang GuoTong Pipeline are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, XinJiang GuoTong may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Loctek Ergonomic Tec

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with XinJiang GuoTong and Loctek Ergonomic

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

The idea behind XinJiang GuoTong Pipeline and Loctek Ergonomic Technology 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.