Correlation Between Luolai Home and Der International

Can any of the company-specific risk be diversified away by investing in both Luolai Home and Der International 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 Der International 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 Der International Home, you can compare the effects of market volatilities on Luolai Home and Der International 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 Der International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Luolai Home and Der International.

Diversification Opportunities for Luolai Home and Der International

0.73

Correlation Coefficient

Luolai Home  Der International

Poor diversification

The 3 months correlation between Luolai and Der is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Luolai Home Textile and Der International Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Der International Home 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 Der International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Der International Home has no effect on the direction of Luolai Home i.e., Luolai Home and Der International go up and down completely randomly.

Pair Corralation between Luolai Home and Der International

Assuming the 90 days trading horizon Luolai Home Textile is expected to generate 0.58 times more return on investment than Der International. However, Luolai Home Textile is 1.72 times less risky than Der International. It trades about 0.2 of its potential returns per unit of risk. Der International Home is currently generating about 0.11 per unit of risk. If you would invest  728.00  in Luolai Home Textile on December 2, 2024 and sell it today you would earn a total of  32.00  from holding Luolai Home Textile or generate 4.4% return on investment over 90 days.

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

Luolai Home Textile  vs.  Der International Home

Luolai Home Textile

Risk-Adjusted Performance

Very Weak

Over the last 90 days Luolai Home Textile 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.

Der International Home

Risk-Adjusted Performance

Very Weak

Over the last 90 days Der International Home 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 Luolai Home and Der International

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

The idea behind Luolai Home Textile and Der International Home 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.