Correlation Between Huizhou Desay and Lonkey Industrial

Can any of the company-specific risk be diversified away by investing in both Huizhou Desay and Lonkey Industrial 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 Huizhou Desay and Lonkey Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Huizhou Desay SV and Lonkey Industrial Co, you can compare the effects of market volatilities on Huizhou Desay and Lonkey Industrial 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 Huizhou Desay with a short position of Lonkey Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huizhou Desay and Lonkey Industrial.

Diversification Opportunities for Huizhou Desay and Lonkey Industrial

0.19

Correlation Coefficient

Huizhou Desay  Lonkey Industrial

Average diversification

The 3 months correlation between Huizhou and Lonkey is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Huizhou Desay SV and Lonkey Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lonkey Industrial and Huizhou Desay 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 Huizhou Desay SV are associated (or correlated) with Lonkey Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lonkey Industrial has no effect on the direction of Huizhou Desay i.e., Huizhou Desay and Lonkey Industrial go up and down completely randomly.

Pair Corralation between Huizhou Desay and Lonkey Industrial

Assuming the 90 days trading horizon Huizhou Desay is expected to generate 2.69 times less return on investment than Lonkey Industrial. In addition to that, Huizhou Desay is 1.1 times more volatile than Lonkey Industrial Co. It trades about 0.03 of its total potential returns per unit of risk. Lonkey Industrial Co is currently generating about 0.08 per unit of volatility. If you would invest  319.00  in Lonkey Industrial Co on December 25, 2024 and sell it today you would earn a total of  36.00  from holding Lonkey Industrial Co or generate 11.29% return on investment over 90 days.

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

Huizhou Desay SV  vs.  Lonkey Industrial Co

Huizhou Desay SV

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Huizhou Desay SV are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Huizhou Desay is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lonkey Industrial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lonkey Industrial Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lonkey Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Huizhou Desay and Lonkey Industrial

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

The idea behind Huizhou Desay SV and Lonkey Industrial 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.