Correlation Between Jiangxi Hengda and Luolai Home

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

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

Diversification Opportunities for Jiangxi Hengda and Luolai Home

0.86

Correlation Coefficient

Jiangxi Hengda  Luolai Home

Very poor diversification

The 3 months correlation between Jiangxi and Luolai is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Jiangxi Hengda Hi Tech and Luolai Home Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luolai Home Textile and Jiangxi Hengda 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 Jiangxi Hengda Hi Tech are associated (or correlated) with Luolai Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luolai Home Textile has no effect on the direction of Jiangxi Hengda i.e., Jiangxi Hengda and Luolai Home go up and down completely randomly.

Pair Corralation between Jiangxi Hengda and Luolai Home

Assuming the 90 days trading horizon Jiangxi Hengda Hi Tech is expected to generate 1.95 times more return on investment than Luolai Home. However, Jiangxi Hengda is 1.95 times more volatile than Luolai Home Textile. It trades about 0.0 of its potential returns per unit of risk. Luolai Home Textile is currently generating about -0.04 per unit of risk. If you would invest  646.00  in Jiangxi Hengda Hi Tech on October 4, 2024 and sell it today you would lose (154.00) from holding Jiangxi Hengda Hi Tech or give up 23.84% of portfolio value over 90 days.

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

Jiangxi Hengda Hi Tech  vs.  Luolai Home Textile

Jiangxi Hengda Hi

Risk-Adjusted Performance

0 of 100

Very Weak

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

Luolai Home Textile

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Luolai Home Textile are ranked lower than 1 (%) 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.

Pair Trading with Jiangxi Hengda and Luolai Home

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

The idea behind Jiangxi Hengda Hi Tech and Luolai Home Textile 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.