Correlation Between Success Electronics and China Longyuan

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

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

Diversification Opportunities for Success Electronics and China Longyuan

0.68

Correlation Coefficient

Success Electronics  China Longyuan

Poor diversification

The 3 months correlation between Success and China is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Success Electronics and China Longyuan Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Longyuan Power and Success Electronics 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 Success Electronics are associated (or correlated) with China Longyuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Longyuan Power has no effect on the direction of Success Electronics i.e., Success Electronics and China Longyuan go up and down completely randomly.

Pair Corralation between Success Electronics and China Longyuan

Assuming the 90 days trading horizon Success Electronics is expected to generate 1.71 times more return on investment than China Longyuan. However, Success Electronics is 1.71 times more volatile than China Longyuan Power. It trades about -0.04 of its potential returns per unit of risk. China Longyuan Power is currently generating about -0.29 per unit of risk. If you would invest  384.00  in Success Electronics on October 5, 2024 and sell it today you would lose (12.00) from holding Success Electronics or give up 3.12% of portfolio value over 90 days.

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

Success Electronics  vs.  China Longyuan Power

Success Electronics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Success Electronics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Success Electronics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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.

Pair Trading with Success Electronics and China Longyuan

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

The idea behind Success Electronics and China Longyuan Power 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.

Check out your portfolio center.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .