Correlation Between Linzhou Heavy and Biwin Storage

Can any of the company-specific risk be diversified away by investing in both Linzhou Heavy and Biwin Storage 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 Linzhou Heavy and Biwin Storage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Linzhou Heavy Machinery and Biwin Storage Technology, you can compare the effects of market volatilities on Linzhou Heavy and Biwin Storage 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 Linzhou Heavy with a short position of Biwin Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Linzhou Heavy and Biwin Storage.

Diversification Opportunities for Linzhou Heavy and Biwin Storage

-0.04

Correlation Coefficient

Linzhou Heavy  Biwin Storage

Good diversification

The 3 months correlation between Linzhou and Biwin is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Linzhou Heavy Machinery and Biwin Storage Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biwin Storage Technology and Linzhou Heavy 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 Linzhou Heavy Machinery are associated (or correlated) with Biwin Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biwin Storage Technology has no effect on the direction of Linzhou Heavy i.e., Linzhou Heavy and Biwin Storage go up and down completely randomly.

Pair Corralation between Linzhou Heavy and Biwin Storage

Assuming the 90 days trading horizon Linzhou Heavy Machinery is expected to generate 0.68 times more return on investment than Biwin Storage. However, Linzhou Heavy Machinery is 1.46 times less risky than Biwin Storage. It trades about 0.0 of its potential returns per unit of risk. Biwin Storage Technology is currently generating about -0.05 per unit of risk. If you would invest  394.00  in Linzhou Heavy Machinery on October 24, 2024 and sell it today you would lose (3.00) from holding Linzhou Heavy Machinery or give up 0.76% of portfolio value over 90 days.

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

Linzhou Heavy Machinery  vs.  Biwin Storage Technology

Linzhou Heavy Machinery

Risk-Adjusted Performance

2 of 100

Weak

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

Biwin Storage Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Linzhou Heavy and Biwin Storage

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

The idea behind Linzhou Heavy Machinery and Biwin Storage 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.