Correlation Between Changzhou Almaden and Linewell Software

Can any of the company-specific risk be diversified away by investing in both Changzhou Almaden and Linewell Software 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 Changzhou Almaden and Linewell Software into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Changzhou Almaden Co and Linewell Software Co, you can compare the effects of market volatilities on Changzhou Almaden and Linewell Software 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 Changzhou Almaden with a short position of Linewell Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changzhou Almaden and Linewell Software.

Diversification Opportunities for Changzhou Almaden and Linewell Software

0.14

Correlation Coefficient

Changzhou Almaden  Linewell Software

Average diversification

The 3 months correlation between Changzhou and Linewell is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Changzhou Almaden Co and Linewell Software Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linewell Software and Changzhou Almaden 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 Changzhou Almaden Co are associated (or correlated) with Linewell Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linewell Software has no effect on the direction of Changzhou Almaden i.e., Changzhou Almaden and Linewell Software go up and down completely randomly.

Pair Corralation between Changzhou Almaden and Linewell Software

Assuming the 90 days trading horizon Changzhou Almaden Co is expected to under-perform the Linewell Software. But the stock apears to be less risky and, when comparing its historical volatility, Changzhou Almaden Co is 2.24 times less risky than Linewell Software. The stock trades about -0.03 of its potential returns per unit of risk. The Linewell Software Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,097  in Linewell Software Co on December 28, 2024 and sell it today you would earn a total of  206.00  from holding Linewell Software Co or generate 18.78% return on investment over 90 days.

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

Changzhou Almaden Co  vs.  Linewell Software Co

Changzhou Almaden

Risk-Adjusted Performance

Very Weak

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

Linewell Software

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Linewell Software Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Linewell Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Changzhou Almaden and Linewell Software

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

The idea behind Changzhou Almaden Co and Linewell Software Co 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.