Correlation Between Luolai Home and Jiangsu Jinling

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

Diversification Opportunities for Luolai Home and Jiangsu Jinling

0.92

Correlation Coefficient

Luolai Home  Jiangsu Jinling

Almost no diversification

The 3 months correlation between Luolai and Jiangsu is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Luolai Home Textile and Jiangsu Jinling Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Jinling Sports 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 Jiangsu Jinling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Jinling Sports has no effect on the direction of Luolai Home i.e., Luolai Home and Jiangsu Jinling go up and down completely randomly.

Pair Corralation between Luolai Home and Jiangsu Jinling

Assuming the 90 days trading horizon Luolai Home Textile is expected to generate 0.94 times more return on investment than Jiangsu Jinling. However, Luolai Home Textile is 1.06 times less risky than Jiangsu Jinling. It trades about 0.26 of its potential returns per unit of risk. Jiangsu Jinling Sports is currently generating about 0.1 per unit of risk. If you would invest  760.00  in Luolai Home Textile on September 13, 2024 and sell it today you would earn a total of  102.00  from holding Luolai Home Textile or generate 13.42% return on investment over 90 days.

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

Luolai Home Textile  vs.  Jiangsu Jinling Sports

Luolai Home Textile

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Luolai Home Textile are ranked lower than 17 (%) 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.

Jiangsu Jinling Sports

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Jinling Sports are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Jinling sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Luolai Home and Jiangsu Jinling

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

The idea behind Luolai Home Textile and Jiangsu Jinling Sports 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..