Correlation Between Luolai Home and Hunan Mendale

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

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

Diversification Opportunities for Luolai Home and Hunan Mendale

0.28

Correlation Coefficient

Luolai Home  Hunan Mendale

Modest diversification

The 3 months correlation between Luolai and Hunan is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Luolai Home Textile and Hunan Mendale Hometextile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hunan Mendale Hometextile and Luolai Home 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 Luolai Home Textile are associated (or correlated) with Hunan Mendale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hunan Mendale Hometextile has no effect on the direction of Luolai Home i.e., Luolai Home and Hunan Mendale go up and down completely randomly.

Pair Corralation between Luolai Home and Hunan Mendale

Assuming the 90 days trading horizon Luolai Home is expected to generate 8.4 times less return on investment than Hunan Mendale. But when comparing it to its historical volatility, Luolai Home Textile is 2.56 times less risky than Hunan Mendale. It trades about 0.05 of its potential returns per unit of risk. Hunan Mendale Hometextile is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  267.00  in Hunan Mendale Hometextile on December 30, 2024 and sell it today you would earn a total of  142.00  from holding Hunan Mendale Hometextile or generate 53.18% return on investment over 90 days.

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

Luolai Home Textile  vs.  Hunan Mendale Hometextile

Luolai Home Textile

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Luolai Home Textile are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Luolai Home is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hunan Mendale Hometextile

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Mendale Hometextile are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Mendale sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Luolai Home and Hunan Mendale

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

The idea behind Luolai Home Textile and Hunan Mendale Hometextile 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.