Correlation Between Suofeiya Home and Luyin Investment

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

By analyzing existing cross correlation between Suofeiya Home Collection and Luyin Investment Group, you can compare the effects of market volatilities on Suofeiya Home and Luyin Investment 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 Suofeiya Home with a short position of Luyin Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suofeiya Home and Luyin Investment.

Diversification Opportunities for Suofeiya Home and Luyin Investment

0.8

Correlation Coefficient

Suofeiya Home  Luyin Investment

Very poor diversification

The 3 months correlation between Suofeiya and Luyin is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Suofeiya Home Collection and Luyin Investment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luyin Investment and Suofeiya 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 Suofeiya Home Collection are associated (or correlated) with Luyin Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luyin Investment has no effect on the direction of Suofeiya Home i.e., Suofeiya Home and Luyin Investment go up and down completely randomly.

Pair Corralation between Suofeiya Home and Luyin Investment

Assuming the 90 days trading horizon Suofeiya Home Collection is expected to under-perform the Luyin Investment. In addition to that, Suofeiya Home is 1.04 times more volatile than Luyin Investment Group. It trades about -0.06 of its total potential returns per unit of risk. Luyin Investment Group is currently generating about 0.01 per unit of volatility. If you would invest  616.00  in Luyin Investment Group on November 29, 2024 and sell it today you would lose (3.00) from holding Luyin Investment Group or give up 0.49% of portfolio value over 90 days.

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

Suofeiya Home Collection  vs.  Luyin Investment Group

Suofeiya Home Collection

Risk-Adjusted Performance

Very Weak

Over the last 90 days Suofeiya Home Collection 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.

Luyin Investment

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Suofeiya Home and Luyin Investment

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

The idea behind Suofeiya Home Collection and Luyin Investment Group 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.